SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DECEMBER 4, 1997 ( November 19, 1997 )
DATE OF REPORT (Date of earliest event reported)
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EIF HOLDINGS, INC.
(Exact name of registrant as specified in its Charter)
Commission File Number 0-22388
HAWAII 99-0273889
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No)
15201 Pipeline Lane, Ste. B
Huntington Beach, CA 92649
(Address of principal executive offices)
(714) 897-9000
(Issuer's telephone number)
475 N. Muller Street, Anaheim, CA 92801
(Former name,former address and former fiscal year if changed since last report)
There are 268 sequentially numbered pages included on this Form 8-K/A.
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This Form 8-K/A, Amendment Number 1, amends and supplements the Form 8-K dated
December 3, 1997 (the "Original Form 8-K") filed by EIF Holdings, Inc. The sole
purpose of this Amendment Number 1 is to properly reflect the date of event and
the report due date for the JL Manta Acquisition as November 19, 1997 and
December 4, 1997 respectively, and to include Exhibit 10.20 "Security Agreement
Executed by the Company in favor of Harris", which was ommitted in the original
filing. This Amendment Number 1 hereby amends and restates the Original Form 8-K
in its entirety and reads as follows.
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 19, 1997, the registrant, EIF Holdings, Inc. (the "Company"),
completed its acquisition of JL Manta, Inc. ("Manta"), an Illinois corporation
which provides specialized maintenance services for clients in the industrial,
environmental and low-level nuclear sectors. Pursuant to the terms of a Stock
Purchase Agreement, dated as of September 30, 1997, EIF acquired all of the
issued and outstanding common stock, no par value per share, of Manta (the
"Manta Stock") from the stockholders of Manta (the "Manta Stockholders"). In
consideration for the sale of their stock, the Manta Stockholders received an
aggregate of Four Million, Seven Hundred and Twenty Five Thousand Three Hundred
and Twenty One and 64/100 ($4,725,321.64) Dollars in cash and Two Million Two
Hundred and Thirty Five Thousand Three Hundred and Twelve ($2,235,312) Dollars
in convertible promissory notes of EIF, payable in installments with a final
payment due on November 18, 2000 (the "Stockholder Notes"). Subject to the
approval by EIF's stockholders of an amendment to EIF's charter authorizing the
requisite amount of stock (the "Amendment"), at any time after June 30, 1998 the
holders of the Stockholder Notes may convert any principal payment due under the
Stockholder Notes into shares of EIF's common stock, no par value per share (the
"EIF Stock"), at a conversion price equal to the closing transaction price of
the EIF Stock on the date a conversion notice is received by EIF (the
"Conversion Price")
Concurrently with the closing of the Acquisition, certain Manta Stockholders and
key employees entered into Retention Bonus Agreements with EIF providing for
bonus payments in the aggregate amount of Nine Hundred Thousand ($900,000)
Dollars to be made by EIF over a three (3) year period. Subject to the approval
by EIF's Stockholders of the Amendment, at any time after June 30, 1998, in lieu
of receiving any bonus payment, the Manta Stockholders party to a Retention
Bonus Agreement may convert such payment into shares of EIF Stock at the
Conversion Price. Also at the closing of the Acquisition, certain Manta
Stockholders and key employees were granted options to purchase Three Hundred
Thousand (300,000) shares of EIF Stock at an exercise price of Thirty Four Cents
($0.34)per share. In connection with the Agreement, EIF agreed to issue options
to purchase an additional Two Hundred Thousand (200,000) shares of such EIF
Stock upon approval by EIF's stockholders of the Amendment.
Also concurrently with the Acquisition, in connection with financing provided to
EIF, EIF issued a Six Million, Five Hundred Thousand ($6,500,000) Dollar
Convertible Promissory Note (the "Deere Park Nominee Note") to Deere Park
Capital Management, Inc. ("Deere Park"), as nominee for certain Reg. D Hedge
Funds and EIFH Joint Venture, L.L.C. The Deere Park Nominee Note bears interest
at the rate of Five and One-Quarter percent (5 1/4%) per annum, becomes due on
May 18, 1999 and is secured by a pledge of all of the Manta Stock. Subject to
approval of EIF Stockholders of an amendment to EIF's charter authorizing the
requisite amount of preferred and common stock, the Deere Park Nominee Note is
convertible into Five and One-Quarter percent (5 1/4%) preferred convertible
stock at a conversion price of One Dollar ($1.00) per share , with such
preferred convertible stock convertible into EIF common stock. Six Million
($6,000,000) Dollars of such loan amount was used by EIF to finance the
Acquisition and Five Hundred Thousand ($500,000) Dollars of such loan amount was
paid to Deere Park Equities, L.L.C. as a placement agent.
Also in connection with the Acquisition, EIF issued a Two Million, Five Hundred
Thousand ($2,500,000) Dollar Promissory Note (the "Deere Park Note") to Deere
Park. The Deere Park Note bears interest at the rate of Nine Percent (9%) per
annum and becomes due on February 16, 1998. The loan amount represented by the
Deere Park Note was used by EIF to refinance certain indebtedness of Manta.
JL Manta has working capital and fixed asset based credit facilities which it
utilizes in the normal course of business. Essentially all of the assets of JL
Manta are pledged as security under one or more of these facilities. The loan
agreements which govern these facilities contain typical covenants, including
financial covenants, with which the Company must comply.
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a.) Financial statements of business acquired.
Pursuant to the provisions in paragraph (a)(4), the audited financial statements
of the acquired Company, JL Manta, Inc., will be filed within 60 days of
December 4, 1997, the day that this report was due to be filed.
(b.) Pro forma financial information.
Pursuant to the provisions in paragraph (a)(4), the pro forma financial
statements of the Company showing the effect of the acquisition will be filed
within 60 days of December 4, 1997, the day that this report was due to be
filed.
(c.) Exhibits.
10.1 Stock Purchase Agreement, dated September 30, 1997, among EIF
Holdings, Inc. ("EIF") and each of the stockholders of JL Manta,
Inc.
10.2 $6.5 Million Convertible Promissory Note issued by EIF to
Deere Park Capital Management, Inc., as nominee for EIFH
Joint Venture, L.L.C. and Certain Reg. D Hedge Funds.
10.3 $2.5 Million Convertible Promissory Note from EIF to
Deere Park Capital Management, Inc. ("Deere Park").
10.4 Convertible Promissory Note of EIF, issued to Leo J. Manta.
10.5 Convertible Promissory Note of EIF, issued to Steven A. Manta.
10.6 Convertible Promissory Note of EIF, issued to Michael J. Chakos.
10.7 Convertible Promissory Note of EIF, issued to John L. Manta.
10.8 Convertible Promissory Note of EIF, issued to the Alexander Manta
Trust.
10.9 Convertible Promissory Note of EIF, issued to the Erica Manta
Trust.
10.10 Convertible Promissory Note of EIF, issued to the Zachary Manta
Trust.
10.11 Convertible Promissory Note of EIF, issued to Allen DeLange.
10.12 Convertible Promissory Note of EIF, issued to Jon S. Claypool.
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10.13 Pledge Agreement by and among EIF and Deere Park Capital
Management, Inc., regarding $2.5 Million Promissory Note.
10.14 Security Agreement between the Company and Deere Park.
10.15 Pledge Agreement by and among EIF, Deere Park Eqities, L.L.C. and
Deere Park Capital Mgmt as nominee for EIFH Joint Venture and
certain Reg. D Hedge Funds, regarding $6.5 million Note.
10.16 Registration Right Agreement between EIF and each of the sellers.
10.17 Form of Guaranty
10.18 Employment Agreement between the Company and John L. Manta.
10.19 Employment Agreement between the Company and Michael J. Chakos.
10.20 Security Agreement executed by the Company in favor of Harris.
99.1 Press Release issued by the registrant on November 20, 1997
announcing the acquisition of JL Manta, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EIF HOLDINGS, INC.
By: /s/ J. Drennan Lowell
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J. Drennan Lowell
Vice President, Chief Financial Officer,
Treasurer and Secretary.
Dated: December 4, 1997
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STOCK PURCHASE AGREEMENT
AMONG
EIF Holdings, Inc.
AND
Leo J. Manta
Steven A. Manta
Michael J. Chakos
John L. Manta
Allan DeLange
John L. Manta, as Trustee of
Zachary Manta Trust
John L. Manta, as Trustee of
Erica Manta Trust
John L. Manta, as Trustee of
Alexander Manta Trust
Leo G. Manta
Jon S. Claypool
September 30, 1997
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STOCK PURCHASE AGREEMENT
Agreement entered into as of September 30, 1997 (the "Agreement"), by and
among EIF Holdings, Inc., a Hawaii corporation (the "Buyer"), and Leo J. Manta,
Steven A. Manta, Michael J. Chakos, John L. Manta, Allan DeLange, John L. Manta,
as Trustee of Zachary Manta Trust, John L. Manta, as Trustee of Erica Manta
Trust, John L. Manta, as Trustee of Alexander Manta Trust, Leo G. Manta, and Jon
S. Claypool (collectively, the "Sellers" and each individually, a "Seller"). The
Buyer and the Sellers are referred to collectively herein as the "Parties", and
each individually is sometimes referred to herein as a "Party."
Recitals
The Sellers in the aggregate own all of the outstanding capital stock of
J.L. Manta, Inc., an Illinois corporation (the "Company").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of the
outstanding capital stock of the Company in return for cash and the Convertible
Promissory Notes.
Agreement
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Additional Stock Option Agreements" has the meaning set forth in ss.6(j)
below.
"Adverse Consequences" means all damages, dues, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens,
losses, expenses, and fees, including court costs and reasonable attorneys' fees
and expenses, incurred by an Indemnified Party (as defined in ss.8(e)(i)).
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Agreement" has the meaning set forth in the preface above.
"Applicable Rate" means the corporate base rate of interest published
from time to time in the Money Rates column of the Wall Street Journal plus 2%
per annum.
"Amendment" has the meaning set forth in ss.6(e).
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"Assignment Agreement" has the meaning set forth in ss.5(j) below.
"Associate" when used to indicate a relationship with any person means
(i) any corporation, partnership, limited liability company or other entity of
which such person is an officer, manager, member or partner or is, directly or
indirectly, the beneficial owner of any class of equity securities, partnership
interest or membership interest; or (ii) any trust or other estate in which such
person has a beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity; or (iii) any relative or spouse of such person,
or any relative of such spouse; or (iv) any corporation, partnership, limited
liability company of which any relative or spouse of such person, or any
relative of such spouse, is an officer, manager, member or partner or is,
directly or indirectly, the beneficial owner of any class of equity securities,
partnership interest or membership interest; or (v) any trust or other estate in
which any relative or spouse of such person, or any relative of such spouse, has
a beneficial interest or as to which such person serves as a trustee or in a
similar fiduciary capacity.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or which is reasonably likely
to form the basis for any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Buyer Common Stock" has the meaning set forth in ss.3(b)(iv) below.
"Buyer's Financial Statements" has the meaning set forth in ss.3(b)(viii)
below.
"Buyer's Transaction Documents" means this Agreement, the Employment
Agreements, the Registration Rights Agreement, the Convertible Promissory Notes,
the Retention Bonus Agreements, the Stock Option Agreements, the Guaranty, and
any and all other documents required to be executed and delivered by Buyer at
the Closing.
"Closing" has the meaning set forth in ss.2(c) below.
"Closing Date" has the meaning set forth in ss.2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Confidential Information" means any information concerning the
businesses and affairs of the Company which the Company currently regards or
treats as confidential and proprietary and that is not generally available to
the public as of the date of this Agreement.
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"Consulting Agreement" has the meaning set forth in ss.6(k) below.
"Controlled Group of Corporations" has the meaning set forth in Code
ss.1563.
"Convertible Promissory Notes" has the meaning set forth in ss.2(b) below.
"Convertible Securities" has the meaning set forth in the definition of
"Sufficient Buyer Common Stock Amount."
"Customer Contracts" means all of the Company's contracts, purchase orders,
customer accounts, time and material accounts, and other rights to provide
services to customers of the Company, whether oral or written, in force and
effect as of the Closing Date, other than (i) fixed price or lump-sum contracts
and agreements which provide for lump-sum or fixed-price payments to the Company
of less than $300,000, or (ii) "time and materials" contracts and agreements in
respect of which the Company has earned revenue of less than $300,000 for the
twelve (12) months prior to the date hereof or in respect of which the Company
is anticipated to earn revenue of less than $300,000 for the twelve (12) months
prior to the Closing Date.
"Disclosure Schedule" has the meaning set forth in ss.4 below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA ss.3(1).
"Employment Agreement" has the meaning set forth in ss.6(k) below.
"Encumbrances" means any liens, charges, mortgages, suretyships,
attachments, encumbrances, pledges, Security Interests, Taxes, options,
warrants, purchase rights, contracts, commitments, equities, demands, claims,
exceptions, usufructs, title defects, licenses, conditions, equitable interests,
preemptive rights, rights of first refusal, restrictions of any kind including,
but not limited to, any restriction on use, voting, transfer, receipt of income,
or exercise of any other attribute of ownership, or any voting trusts or
shareholder agreements, options, calls, or any other restrictions or third party
rights.
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"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended through the Closing Date, together with all other
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or employee health and
safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Existing Reports" means (i) that certain Scope of Work Letter dated April
27, 1994 by RERC Environmental ("RERC"); (ii) that certain Letter dated
September 9, 1994 by RERC; (iii) that certain Limited Environmental Site
Characterization dated May 2, 1995 prepared by Environmental Protection
Industries; and (iv) that certain Limited Environmental Review dated June 17,
1996 prepared by Property Solutions Incorporated.
"Financial Statement" has the meaning set forth in ss.4(g) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"General Release" has the meaning set forth in ss.7(a)(vii) below.
"Guaranty" has the meaning set forth in ss.7(b)(xiii) below.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in ss.8(e) below.
"Indemnifying Party" has the meaning set forth in ss.8(e) below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
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reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Mark F. Manta Waiver" has the meaning set forth in ss.5(j) below.
"Material Adverse Effect" means a material adverse effect on the
business, financial condition, operations, results of operations or future
prospects of the Company. For purposes hereof, no Liability shall be considered
to constitute a Material Adverse Effect if it is less than $50,000.00.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in ss.4(g)
below.
"Most Recent Fiscal Year End" has the meaning set forth in ss.4(g) below.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37).
"Non-Compete Period" means, with respect to each Seller, the period
commencing on the Closing Date and ending on the earlier of (i) the fifth
anniversary of the Closing Date, (ii) for those Sellers who have entered into an
Employment Agreement, the date on which such Seller is no longer subject to the
non-compete provisions set forth in Section 4.2 of such Seller's Employment
Agreement, or (iii) the date on which the Company shall discontinue operating
its business (provided, however, that any sale of the Company's business, either
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through a sale of all or a majority of the stock of the Company or all or
substantially all of the assets of the Company, shall in no manner and in no
event constitute a discontinuation of the Company's business).
"Notice Recipient" means, with respect to each Party, the individual
specified to receive notice in accordance with ss.11(h) hereof.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Officer Loans" has the meaning set forth in ss.2(b) below.
"Parties" and "Party" have the respective meanings set forth in the preface
above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" means (i) liens for Taxes, assessments and other
governmental charges not yet due and payable, or being contested in good faith
by permissible proceedings and set forth in ss.4(e) and ss.4(l) of the
Disclosure Schedule; (ii) customary retention of title provisions contained in
contracts with suppliers for purchase of goods or equipment entered into in the
Ordinary Course of Business pending payment for such goods or equipment in
accordance with customary payment terms; (iii) mechanics', warehousemen's,
landlords' and other similar statutory liens incurred in the Ordinary Course of
Business; provided, however, that such statutory liens have not resulted from
any failure to pay amounts due and owing in the Ordinary Course of Business;
(iv) easements, rights-of-way, covenants, conditions and other restrictions
which do not materially interfere with the present use, occupancy or operation
of any real property; (v) roads and highways, spurs and switch tracts, and
rights-of-way of any railroad serving any real property; (vi) planning, zoning,
business and other similar governmental regulations; (vii) unrecorded easements
or rights-of-way for any utilities providing utility services to any real
property; (viii) encroachments which do not materially interfere with the use,
occupancy or operation of any real property and which are disclosed on the
Survey; and (ix) all matters disclosed on the Survey.
"Person" means an individual, a general or limited partnership, a
limited liability company, a limited liability partnership, a corporation
(including any non-profit corporation), an association, a joint stock company, a
trust, a joint venture, an estate, a trust, an unincorporated organization, or a
governmental entity (or any department, agency, or political subdivision
thereof).
"Purchase Price" has the meaning set forth in ss.2(b) below.
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"Registration Rights Agreement" has the meaning set forth in ss.7(a)(viii)
below.
"Required Consents" means the consents and approvals identified in
ss.5(b) of the Disclosure Schedule, the receipt and completion of which shall be
a condition of the consummation of the Buyer's obligations hereunder.
"Requisite Sellers" means Sellers holding a majority in interest of the
Shares as set forth in ss.4(b) of the Disclosure Schedule.
"Retention Bonus Agreements" has the meaning set forth in ss.6(i).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable, (c) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"Seller" and "Sellers" have the respective meanings set forth in the
preface above.
"Sellers' Transaction Documents" means this Agreement, the Employment
Agreements, the Retention Bonus Agreements, the Stock Option Agreements, the
General Releases, the Registration Rights Agreement and any and all other
documents required to be executed and delivered by the Sellers at the Closing.
"Seller Receivables" has the meaning set forth in ss.5(j)(i) below.
"Share" means any share of the Common Stock, no par value per share, of the
Company.
"Stock Option Agreements" has the meaning set forth in ss.6(j) below.
"Subcontract" means any subcontracts, agreements, contracts or commitments
with any subcontractors, vendors or suppliers of any labor or material with
respect to any project which is the subject of any of the Customer Contracts,
other than those that (i) can be terminated, without any cost or liability to
the Company, upon thirty (30) days or less notice, or (ii) involve less than
$10,000 when aggregated with all other such subcontracts, agreements, contracts
or commitments.
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"Stock Encumbrances" has the meaning set forth in ss.3(a)(vi) below.
"Subsidiary" means any corporation or other form of business
organization with respect to which a specified Person (or a Subsidiary thereof)
owns a majority of the common stock or other ownership interest or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors or other Person entitled to direct the management and control of such
business organization.
"Sufficient Buyer Common Stock Amount" means as of any date the
aggregate number of shares of Buyer's authorized but unissued voting no par
value common stock ("Buyer Common Stock") that would be required to be issued by
Buyer under all of the Stock Option Agreements, Additional Stock Option
Agreements, Convertible Promissory Notes and Retention Bonus Agreements
(collectively, the "Convertible Securities"), as appropriately adjusted therein,
if on such date all of the holders of the Convertible Securities were entitled
to and in fact did, exercise all of their respective options under the Stock
Option Agreements and Additional Stock Option Agreements and convert the entire
unpaid outstanding balances under the Convertible Promissory Notes and Retention
Bonus Agreements.
"Survey" has the meaning set forth in ss.5(h) below.
"Tax" and "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
ss.59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in ss.8(e) below.
2. Purchase and Sale of Shares.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from each of the Sellers, and each
of the Sellers agrees to sell to the Buyer, all of his or its Shares for the
Purchase Price specified and defined below in this ss.2.
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(b) Purchase Price. The Buyer agrees to pay to the Sellers at the
Closing Seven Million, Six Hundred Thousand Dollars ($7,600,000) (the "Purchase
Price") by delivery of (i) its convertible promissory notes (the "Convertible
Promissory Notes") in the form of Exhibit A attached hereto in the aggregate
principal amount of Two Million, Two Hundred Thirty-five Thousand, Three Hundred
Twelve Dollars ($2,235,312) to certain of the Sellers listed in ss.2(b)(ii) of
the Disclosure Schedule, in the aggregate principal amounts set forth therein,
and (ii) cash in the aggregate amount of Five Million, Three Hundred and Sixty
Four Thousand, Six Hundred and Eighty Eight Dollars ($5,364,688) for the balance
of the Purchase Price, payable by wire transfer or delivery of other immediately
available funds to the Sellers in the amounts set forth in ss.2(b)(ii) of the
Disclosure Schedule. At Closing, the cash balance of the Purchase Price to be
paid at the Closing shall be reduced by the sum of (i) the amount of the
Company's loans to its officers as set forth in ss.2(b)(ii)(1) of the Disclosure
Schedule (collectively, the "Officer Loans"), and (ii) the amount of any
outstanding Seller Receivables as referred to in ss.5(j)(i). The reduction of
the cash portion of the Purchase Price referenced to in the immediately
preceding clause (i) for each Officer Loan shall be made by deducting from the
cash portion of the Purchase Price otherwise due (as set forth on ss.2(b)(ii) of
the Disclosure Schedule) the amount of the Officer Loan from the Seller to whom
such Officer Loan was made. The reduction to the cash portion of the Purchase
Price referenced in the immediately preceding clause (ii) for each outstanding
Seller Receivable shall be made by deducting from the cash portion of the
Purchase Price otherwise due certain of the Sellers, as identified by the
Sellers in a written notice to be executed by all the Sellers and delivered to
the Buyer three (3) days prior to the Closing Date, or in the event such notice
has not been delivered, by reducing the cash portion of the Purchase Price
pro-rata among the Sellers based on the amount of cash due to Sellers (before
deduction of the Officer Loans) at Closing.
(c) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Jenner & Block at
One IBM Plaza, Chicago, Illinois, commencing at 9:00 a.m. local time on November
10, 1997, or such other place, time and date as the Buyer and the Requisite
Sellers may mutually determine (the "Closing Date").
(d) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in ss.7(a) below, (ii) the Buyer will deliver to the Sellers the
various certificates, instruments, and documents referred to in ss.7(b) below,
(iii) each of the Sellers will deliver to the Buyer stock certificates
representing all of his or its Shares, endorsed in blank and accompanied by duly
executed assignment documents, (iv) the Buyer will deliver to (A) each of the
Sellers the Purchase Price in accordance with ss.2(b) above, and (B) the Company
Six Hundred and Thirty Five Thousand, Two Hundred and Ninety-One and 99/100
Dollars ($635,291.99), in immediately available funds, in accordance with
ss.6(i) hereof, and (v) the Company shall pay to the appropriate employee
designated in accordance with ss.6(i), in cash, the amount due each such
employee on the Closing under his or her Retention Bonus Agreement.
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3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Sellers. Each of the Sellers
jointly and severally represents and warrants to the Buyer that the statements
contained in this ss.3(a) are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this ss.3(a)) with respect to himself or itself.
(i) Organization of Certain Sellers. If the Seller is a trust,
the Seller is duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its organization.
(ii) Authorization of Transaction. The Seller has full power
and authority (including, if the Seller is a trust, the trustee of such trust
has the full power and authority) to execute and deliver this Agreement and each
of the other Sellers' Transaction Documents and to perform his or its
obligations hereunder and thereunder. This Agreement and each of the other
Sellers' Transaction Documents constitutes the valid and legally binding
obligation of the Seller, enforceable in accordance with its terms and
conditions. The Seller need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement or
by any of the other Sellers' Transaction Documents, except for such notices,
filings, authorizations, consents or approvals where the failure to so give,
make or obtain would not have, either individually or in the aggregate, a
Material Adverse Effect.
(iii) Noncontravention. Neither the execution and the delivery
of this Agreement by the Seller, nor the consummation by the Seller of the
transactions contemplated hereby to be consummated by the Seller, will (A)
violate any statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Seller is subject or, if the Seller is a trust, any provision
of its trust agreement or other organizing document or (B) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which the Seller is a party or by which he or it is bound
or to which any of his or its assets is subject, except in the case of each of
the immediately preceding clauses (A) and (B), for such violations, conflicts,
defaults or breaches that will not, individually or in the aggregate, either (a)
result in any Liability to the Company, (b) result in any Seller failing or
being unable to, or adversely affecting the ability of any Seller to, transfer
or convey his or its Shares to the Buyer in accordance with the terms hereof
free and clear of any Stock Encumbrances (as defined in ss.3(a)(vi) below), or
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(c) otherwise adversely affect the ability of any Seller to perform his or its
other obligations hereunder in accordance with the terms hereof or the terms of
any of the other Sellers' Transaction Documents.
(iv) Brokers' Fees. The Seller has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(v) Investment. The Seller (A) understands that the
Convertible Promissory Note, the Stock Option Agreement, the Additional Stock
Option Agreement, and the Retention Bonus Agreement have not been, and will not
be, except as provided in the Registration Rights Agreement, registered under
the Securities Act, or under any state securities laws, and are being offered
and sold in reliance upon federal and state exemptions for transactions not
involving any public offering, (B) is acquiring the Convertible Promissory Note,
the Stock Option Agreement, the Additional Stock Option Agreement and the
Retention Bonus Agreement solely for his or its own account for investment
purposes, and not with a view to the distribution thereof, (C) is a
sophisticated investor with knowledge and experience in business and financial
matters, (D) has received certain information concerning the Buyer and has had
the opportunity to obtain additional information as desired in order to evaluate
the merits and the risks inherent in holding the Convertible Promissory Note,
the Stock Option Agreement, the Additional Stock Option Agreement and the
Retention Bonus Agreement, and (E) is able to bear the economic risk and lack of
liquidity inherent in holding the Convertible Promissory Note, the Stock Option
Agreement, the Additional Stock Option Agreement and the Retention Bonus
Agreement.
(vi) Shares. The Seller holds of record and owns beneficially
the number of Shares set forth next to his or its name in ss.4(b) of the
Disclosure Schedule, free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act and state securities laws) and
Encumbrances. Other than this Agreement, and the other agreements, instruments
and arrangements listed next to his or its name in ss.4(b) of the Disclosure
Schedule, which are to be terminated by the Sellers upon the Closing pursuant to
ss.7(a)(xi), the Seller is not a party to any option, warrant, purchase right,
or other contract or commitment that could require the Seller to sell, transfer,
or otherwise dispose of any capital stock of the Company (the "Stock
Encumbrances"). Except as specifically set forth next to his name in ss.4(b) of
the Disclosure Schedule, the Seller is not a party to any voting trust, proxy,
or other agreement or understanding with respect to the voting of any capital
stock of the Company.
(b) Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Sellers that the statements contained in this ss.3(b) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this ss.3(b)).
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(i) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(ii) Authorization of Transaction. The Buyer has full power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and each of the other Buyer's Transaction Documents to
which it is a party and to perform its obligations hereunder and thereunder.
This Agreement and each of the other Buyer's Transaction Documents to which it
is a party constitutes the valid and legally binding obligation of the Buyer,
enforceable in accordance with its terms and conditions. Except for filings
required under the securities laws and regulations of the State of Illinois
(which the Company covenants to make on a timely basis), the Buyer need not give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement or by any of the other Buyer's
Transaction Documents.
(iii) Noncontravention. Neither the execution and the delivery
of this Agreement or any of the other Buyer's Transaction Documents to which it
is a party by the Buyer, nor the consummation of the transactions by the Buyer
contemplated hereby or thereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the Buyer
is subject or any provision of its articles of incorporation or bylaws, (B)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject, or (C) result in the imposition
of any Security Interest upon any of its assets or any of its Subsidiaries other
than any financing obtained by Buyer in connection with this Agreement and the
other Buyer's Transaction Documents including, without limitation, any financing
with Deere Park Equities, Inc. and except in the case of each of the immediately
preceding clauses (A), (B) and (C) for such violations, conflicts, defaults or
breaches that will not, individually or in the aggregate, either (i) result in
the failure of the Buyer to deliver the Purchase Price; or (ii) otherwise
adversely affect the ability of the Buyer to perform its other obligations
hereunder in accordance with the terms hereof or the terms of any of the other
Buyer's Transaction Documents.
(iv) Capitalization. The entire authorized capital stock of
the Buyer consists of 25,000,000 shares of no par value common stock ("Buyer
Common Stock"), of which 24,681,201 shares are issued and outstanding and no
shares are held in treasury. All of the issued and outstanding shares of the
Buyer have been duly authorized, are validly issued, fully paid, and
nonassessable.
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(v) Hart-Scott-Rodino Filing. No notification or other filing
is required pursuant to the Hart-Scott-Rodino Act in connection with the
transactions contemplated by this Agreement.
(vi) Brokers' Fees. The Buyer has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which any Seller could
become liable or obligated.
(vii) Investment. The Buyer is not acquiring the Shares with a
view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act. The Buyer (A) understands that the Shares are
being sold and offered in reliance upon federal and state exemptions for
transactions not involving any public offering; (B) is acquiring the Shares for
its own account for investment purposes, and not with a view to the distribution
thereof; (C) is a sophisticated investor with knowledge and experience in
business and financial matters; and (D) is able to bear the economic risk and
lack of liquidity inherent in holding the Shares; provided, however, that
nothing contained in this Section shall in any way affect the liability of the
Sellers for the representations and warranties made by each of them in this
Agreement.
(viii) Buyer's Financial Statements. Attached hereto as
Exhibit K (the "Buyer's Financial Statements") are the audited balance sheets
and statements of income, changes in stockholders' equity, and cash flow for the
Buyer as of and for the fiscal year ended September 30, 1996. The Buyer's
Financial Statements, including the notes thereto, have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of the Buyer for such
period as of such date and the results of operations of the Buyer for such
period, and are consistent with the books and records of the Buyer for such
period.
4. Representations and Warranties Concerning the Company. Each of the
Sellers jointly and severally represents and warrants to the Buyer that the
statements contained in this ss.4 are correct and complete in all material
respects as of the date of this Agreement and will be correct and complete in
all material respects as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
ss.4), except as set forth in a disclosure letter to be delivered by the Sellers
to the Buyer on the date hereof and signed by each of the Sellers (the
"Disclosure Schedule"). A disclosure in the Disclosure Schedule with respect to
a particular lettered or numbered paragraph in this Section 4 shall not be
deemed to be an adequate disclosure or exception with respect to any
representation or warranty of any Seller contained in any other lettered or
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numbered paragraph in this Section 4 unless (i) such other lettered or numbered
paragraph is specifically referenced in the disclosure, or (ii) based upon the
nature of the disclosure and the facts described therein, it would be clear to a
reasonably prudent business person that such disclosure is also related to and
is an exception or qualification with respect to another representation or
warranty of any Seller contained in this Section 4. The Disclosure Schedule will
be arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this ss.4.
(a) Organization, Qualification, and Corporate Power. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the failure to so qualify
would not have a Material Adverse Effect. The Company has full corporate power
and authority and all licenses, permits, and authorizations necessary to carry
on the businesses in which it is engaged and in which it presently proposes to
engage and to own and use the properties owned and used by it, except for such
licenses, permits and authorizations where the failure to possess or to have
obtained will not have a Material Adverse Effect. ss.4(a) of the Disclosure
Schedule lists the directors and officers of the Company. The Sellers have
delivered to the Buyer correct and complete copies of the articles of
incorporation and bylaws of the Company (as amended to date). The minute books
(containing the records of meetings of the stockholders, the board of directors,
and any committees of the board of directors), the stock certificate books, and
the stock record books of the Company are correct and complete in all material
respects. The Company is not in default under or in violation of any provision
of its articles of incorporation or bylaws.
(b) Capitalization. The entire authorized capital stock of the Company
consists of Nine Thousand (9,000) Shares of common stock, of which Two Thousand
Six Hundred Forty-three and 38/100 (2,643.38) Shares are issued and outstanding
and Seven Hundred Thirty-nine and 46/100 (739.46) Shares are held in treasury,
and One Thousand (1,000) shares of preferred stock, of which no shares are
issued and outstanding. All of the issued and outstanding Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the respective Sellers as set forth in ss.4(b) of the Disclosure
Schedule. Except as otherwise expressly set forth in ss.4(b) of the Disclosure
Schedule, all of which shall be terminated by the Sellers pursuant to
ss.7(a)(xi), there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Company to issue, sell, or
otherwise cause to become outstanding any of its capital stock. Except as
otherwise set forth in ss.4(b) of the Disclosure Schedule, all of which shall be
terminated pursuant to ss.7(a)(xi), there are no (i) outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the Company or (ii) voting trusts, proxies, or other agreements or
understandings with respect to the voting of the Shares.
(c) Noncontravention. Except as otherwise set forth in ss.4(c) of the
Disclosure Schedule, neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (i) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
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decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which the Company is subject or any provision of the
articles of incorporation or bylaws of the Company or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which the Company is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). The Company does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement, except for such notices, filings,
authorizations, consents or approvals where the failure to so make, give or
obtain would not result in any of: (i) a material Liability to the Company or
the Buyer; (ii) a Material Adverse Effect; or (iii) a Party (including any of
the Sellers), having the right to rescind or cause the rescission of the sale of
the Shares to the Buyer hereunder.
(d) Brokers' Fees. The Company does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(e) Title to Assets. The Company has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, located on
its premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Encumbrances, except for Permitted
Encumbrances and properties and assets that are either (i) not shown on the Most
Recent Balance Sheet and are not material or necessary for the operation of the
business and operations of the Company or (ii) disposed of in the Ordinary
Course of Business since the date of the Most Recent Balance Sheet.
(f) Subsidiaries; Joint Ventures.
(i) The Company does not have any Subsidiaries.
(ii) ss.4(f)(ii) of the Disclosure Schedule sets forth a list
of each entity in which the Company holds or has the right to acquire five
percent (5%) or more of the equity, partnership, or other interest of such
entity (each such entity, except Subsidiaries, being referred to as a "Joint
Venture") and a list of all material agreements relating thereto to which the
Company is a party ("Joint Venture Agreements"). The Company and, to the
Sellers' knowledge, each counterpart, is in compliance in all material respects
with all of the terms, conditions, and obligations binding upon each of them in
respect of each of the Joint Venture Agreements, and as of the date hereof none
of the respective Joint Venture Agreements has been terminated. The Sellers have
delivered true and correct copies of each Joint Venture Agreement, as amended,
modified or supplemented, to the Buyer and all waivers executed thereunder. The
Company's interest in each of the Joint Ventures is directly owned by the
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Company as indicated on the Disclosure Schedule and, except for any restriction
on transfer contained in the Joint Venture Agreements, is free and clear of any
material Lien or any other limitation or restriction (including any restriction
on the right to vote, if any, sell, or otherwise dispose of such interest).
There are no outstanding obligations of the Company to fund or make a further
investment in any Joint Venture, other than those that are described in
ss.4(f)(ii) of the Disclosure Schedule.
(g) Financial Statements. Attached hereto as Exhibit D are the
following financial statements (collectively the "Financial Statements"):
audited balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended June 30, 1993, June
30, 1994, June 30, 1995, June 30, 1996 and June 30, 1997 (the "Most Recent
Fiscal Year End") for the Company (with such June 30, 1997 financial statements
being referred to herein as the "Most Recent Financial Statements"). The
Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of the Company as of
such dates and the results of operations of the Company for such periods, and
are consistent with the books and records of the Company (which books and
records are correct and complete in all material respects).
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, and except for the execution by the Company of the
Employment Agreements and Retention Bonus Agreements pursuant hereto and for
such other action expressly required to be taken by the Company hereunder,
thereunder or under any of the other Sellers' Transaction Documents, or
transactions expressly required hereunder, thereunder or under any of the
Sellers' Transaction Documents, there has not been any adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Company that has or would have a Material Adverse Effect.
Without limiting the generality of the foregoing, since that date and except
either (A) as expressly required hereunder or expressly required under any of
the other Sellers' Transaction Documents, or (B) as otherwise set forth in
ss.4(h) of the Disclosure Schedule:
(i) the Company has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair consideration
in the Ordinary Course of Business;
(ii) the Company has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) either (x) involving more than $500,000, individually, for the
provision of labor, services or materials for customers entered into in the
Ordinary Course of Business ("Ordinary Course Contracts"); (y) involving more
than $500,000, individually or in the aggregate, excluding all Ordinary Course
Contracts; or (z) outside of the Ordinary Course of Business;
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(iii) no party (including the Company) has accelerated,
terminated (except with respect to those agreements, contracts, leases or
licenses which have expired by their express terms), modified, or canceled any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) involving more than $500,000, individually or
in the aggregate, to which the Company is a party or by which it is bound;
(iv) the Company has not imposed any Security Interest upon
any of its assets, tangible or intangible, other than in connection with the
acquisition of machinery and equipment in the Ordinary Course of Business;
(v) the Company has not made any capital expenditure (or
series of related capital expenditures) either involving more than $500,000,
individually or in the aggregate, or outside the Ordinary Course of Business;
(vi) the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either involving
more than $15,000 or outside the Ordinary Course of Business;
(vii) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$15,000, individually or in the aggregate, other than in connection with the
acquisition of machinery and equipment in the Ordinary Course of Business;
(viii) the Company has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of Business;
(ix) the Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims) either (A)
involving any of the Sellers, any of the Company's directors or officers, any
Associate of any Seller, any Associate of any of the Company's directors or
officers, CUBS Construction or Golf Corporation or any of their officers,
directors, stockholders or employees, or any of the Seller Receivables,, or (B)
outside the Ordinary Course of Business;
(x) the Company has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the
articles of incorporation or bylaws of the Company;
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(xii) the Company has not issued, sold, or otherwise disposed
of any of its capital stock, or granted any options, warrants, or other rights
to purchase or obtain (including upon conversion, exchange, or exercise) any of
its capital stock;
(xiii) the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xiv) the Company has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to any of its
material property in excess of $500,000, individually or in the aggregate;
(xv) the Company has not made any loan to, entered into any
incentive compensation or bonus agreement or program, distributed or agreed to
distribute any funds outside of the Ordinary Course of Business to, or entered
into any other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xvi) except as expressly provided in this Agreement or any of
the other Sellers' Transaction Documents, the Company has not made any loan to,
entered into any incentive compensation or bonus agreement or program,
distributed or agreed to distribute any funds outside of the Ordinary Course of
Business to, or entered into any other transaction with, any of the Sellers;
(xvii) except as expressly provided by this Agreement or any
of the other Sellers' Transaction documents, the Company has not entered into
any agreement, contract, lease or license, written or oral, or modified the
terms of any existing agreement, contract, lease or license, with any Seller or
any of the Company's directors or officers or with any Associate of any Seller
or Associate of any of the Company's directors or officers;
(xviii) other than "at will" employments entered into in the
Ordinary Course of Business which do not provide for any agreements with respect
to severance pay, the Company has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xix) the Company has not granted any increase in the base
compensation, incentive compensation or bonus of any of its directors, officers,
and employees outside the Ordinary Course of Business;
(xx) the Company has not granted any increase in the base
compensation, incentive compensation or any bonus to the Sellers outside the
Ordinary Course of Business;
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(xxi) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee Benefit
Plan);
(xxii) the Company has not made any other change in employment
terms for any of its directors or officers, outside the Ordinary Course of
Business and has not paid any severance or made any commitment to pay any
severance to any director or officer ;
(xxiii) the Company has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;
(xxiv) there has not been any other occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary Course of
Business involving the Company;
(xxv) the Company has not made or committed to make any
acquisition of all or substantially all of the assets or property of any
business or any stock of any business; and
(xxvi) the Company has not committed to any of the foregoing.
(i) Undisclosed Liabilities. The Company has no Liability (and, to the
Seller's knowledge, there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) except for: (i) Liabilities set forth
on the face of the Most Recent Balance Sheet (including the notes thereto); (ii)
Liabilities which have arisen after the Most Recent Fiscal Year End in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law); (iii) Liabilities disclosed
in the Disclosure Schedule (including the obligation of the Company to perform
the express terms and provisions of any contract or agreement described in the
Disclosure Schedule other than as a result of a breach or a default under such
contracts or agreements, unless such breach or default would not be required to
be disclosed under the express terms of any of the Sellers' representations and
warranties set forth herein); (iv) Liabilities which do not have and will not
have a Material Adverse Effect, individually, on the Company; (iv) Liabilities
which do not have and will not, on an individual basis (and not an aggregate
basis), have a Material Adverse Effect, on the Company; (v) Permitted
Encumbrances; (vi) Liabilities, the existence of which would not constitute a
breach of the express terms (including the terms that qualify any representation
or warranty with knowledge or materiality) of the following representations and
warranties of the Sellers: clauses (i), (ii) and (iii) of the last sentence of
ss.4(c), ss.4(1)(i)(B), ss.4(1)(i)(C), ss.4(1)(ii)(C), ss.4(1)(ii)(D),
ss.4(m)(iii)(C), ss.4(m)(v), ss.4(o)(i), (ii), (iv) and (xii); clauses (C) and
(D) of the last paragraph of ss.4(o) clauses (C) and (D) of the last paragraph
of ss.4(s), ss.4(t)(ii) and the penultimate sentence of ss.4(t), ss.4(u), and
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the penultimate sentence of ss.4(x), and the last two sentences of
ss.4(y)(ii)(B); and (vii) any obligations of the Company to perform the express
terms and provisions of any agreement, note, bond or debt security that is not
expressly required to be disclosed in the Disclosure Schedule under ss.4(h)
above, other than as a result of a breach or default under such agreement, note,
bond or debt security unless such breach or default would not be required to be
disclosed under the express terms of any of the Sellers' representations or
warranties set forth herein.
(j) Legal Compliance. The Company, and its predecessors and Affiliates,
have been operated from its inception, and the Company and its Affiliates will
continue to operate through the Closing Date, in compliance in all material
respects with all conditions and requirements of all applicable federal, state
and local laws, statutes, ordinances, rules, regulations, permits, policies,
guidelines, orders, franchises, authorizations and consents, except where the
failure to so comply would not have a Material Adverse Effect, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against any of them alleging any failure so
to comply.
(k) Tax Matters.
(i) The Company has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all material
respects. Except as set forth on ss.4(k) of the Disclosure Schedule, all Taxes
owed by the Company (whether or not shown on any Tax Return) have been paid.
Except as set forth in ss.4(k) of the Disclosure Schedule, the Company currently
is not the beneficiary of any extension of time within which to file any Tax
Return. Except as set forth on ss.4(k) of the Disclosure Schedule, no claim has
ever been made by an authority in a jurisdiction where the Company does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction.
Except as set forth on ss.4(k) of the Disclosure Schedule, there are no Security
Interests on any of the assets of the Company that arose in connection with any
failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
(iii) No Seller or director or officer (or employee
responsible for Tax matters) of the Company has knowledge of any Basis for any
authority to assess any additional Taxes for any period for which Tax Returns
have been filed. Except as set forth in ss.4(k) of the Disclosure Schedule,
there is no dispute or claim concerning any Tax Liability of the Company either
(A) claimed or raised by any authority in writing or (B) as to which any of the
Sellers and the directors and officers (and employees responsible for Tax
matters) of the Company has Knowledge based upon personal contact with any agent
of such authority. Section 4(k) of the Disclosure Schedule lists all federal,
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state, local, and foreign income Tax Returns filed with respect to the Company
for taxable periods ended on or after June 30, 1993, indicates those Tax Returns
that have been audited for taxable periods ending on or after June 30, 1991, and
indicates those Tax Returns that currently are the subject of audit. The Sellers
have delivered to the Buyer correct and complete copies of all federal income
Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by the Company since June 30, 1993. All deficiencies
proposed as a result of such audits have been paid.
(iv) Except as set forth in ss.4(k) of the Disclosure
Schedule, the Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(v) The Company has not filed a consent under Code ss.341(f)
concerning collapsible corporations. The Company has not made any payments, is
not obligated to make any payments, or is not a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Code ss.280G. The Company has not been a United States real
property holding corporation within the meaning of Code ss.897(c)(2) during the
applicable period specified in Code ss.897(c)(1)(A)(ii). The Company has
disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of Code ss.6662. The Company is not a party to any Tax allocation or
sharing agreement. The Company (A) has not, since June 30, 1991, been a member
of an affiliated group, within the meaning of Code ss.1504(a) or any similar
group defined under a similar provision of state, local or foreign law, filing a
consolidated federal income Tax Return or (B) has any Liability for the Taxes of
any Person under Reg. ss.1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(vi) ss.4(k) of the Disclosure Schedule sets forth the
following information with respect to the Company as of the most recent
practicable date: (A) the basis of the Company in its assets; and (B) the amount
of any net operating loss, net capital loss, unused investment or other credit,
unused foreign tax, or excess charitable contribution allocable to the Company.
(vii) Except as set forth in ss.4(k) of the Disclosure
Schedule, the unpaid Taxes of the Company did not, as of the Most Recent Fiscal
Year End, exceed the reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the Most Recent Balance Sheet (rather than in
any notes thereto). The charges, accruals and reserves with respect to Taxes on
the books of the Company are adequate (as determined in accordance with GAAP),
and, except as set forth in ss.4(k) of the Disclosure Schedule, do not exceed
the reserves for Tax Liability set forth in such books.
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(l) Real Property.
(i) ss.4(l)(i) of the Disclosure Schedule lists and describes
briefly all real property that the Company owns. With respect to each such
parcel of owned real property:
(A) the Company has good and marketable title to the parcel of real
property, free and clear of any Encumbrance other than the Permitted
Encumbrances;
(B) there are no pending or, to the Knowledge of the Sellers,
threatened condemnation proceedings, lawsuits, or administrative actions
relating to the property or other matters affecting adversely the current
use, occupancy, or value thereof;
(C) to the Knowledge of the Sellers, the legal description for the
parcel contained in the deed thereof describes such parcel fully and
adequately, except as disclosed on the Survey the buildings and
improvements are located within the boundary lines of the described parcels
of land, are not in violation of applicable setback requirements, zoning
laws, and ordinances (and none of the properties or buildings or
improvements thereon are subject to "permitted non-conforming use" or
"permitted non-conforming structure" classifications), and except as
disclosed on the Survey do not encroach on any easement which may burden
the land, and the land does not serve any adjoining property for any
purpose inconsistent with the use of the land, and the property is not
located within any flood plain or subject to any similar type of
restriction for which any permits or licenses necessary to the use thereof
have not been obtained;
(D) all facilities have received all approvals of governmental
authorities (including licenses and permits) required in connection with
the ownership or operation thereof (except for such approvals, licenses and
permits where the failure to receive the same would not have a Material
Adverse Effect) and have been operated and maintained in accordance with
applicable laws, rules, and regulations, except for such failure(s), which,
individually or in the aggregate, would not have a Material Adverse Effect;
(E) other than as set forth in ss.4(l)(i) of the Disclosure Schedule,
there are no leases, subleases, licenses, concessions, or other agreements,
written or oral, granting to any party or parties the right of use or
occupancy of any portion of the parcel of real property;
(F) there are no outstanding options or rights of first refusal to
purchase the parcel of real property, or any portion thereof or interest
therein;
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(G) there are no parties (other than the Company) in possession of the
parcel of real property, other than tenants under any leases disclosed in
ss.4(l)(i) of the Disclosure Schedule who are in possession of space to
which they are entitled;
(H) all facilities located on the parcel of real property are supplied
with utilities and other services necessary for the operation of such
facilities, including gas, electricity, water, telephone, sanitary sewer,
and storm sewer, if applicable, all of which services are adequate in
accordance with all applicable laws, ordinances, rules, and regulations and
are provided via public roads or via permanent, irrevocable, appurtenant
easements benefiting the parcel of real property; and
(I) each parcel of real property abuts on and has direct vehicular
access to a public road, or has access to a public road via a permanent,
irrevocable, appurtenant easement benefiting the parcel of real property.
(ii) ss.4(l)(ii) of the Disclosure Schedule lists and describes
briefly all real property leased to the Company. The Company has not
permitted the occupancy of any third party with respect to the real
property listed on ss.4(1)(ii) of the Disclosure Schedule or subleased or
assigned its rights in such property. The Sellers have delivered to the
Buyer correct and complete copies of the leases listed in ss.4(l)(ii) of
the Disclosure Schedule (as amended to date). With respect to each lease
listed in ss.4(l)(ii) of the Disclosure Schedule:
(A) the lease is legal, valid, binding, enforceable, and in full force
and effect;
(B) subject to the delivery of the Required Consents, the lease will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby;
(C) the Company is not, and to the Sellers' Knowledge, no other party
to the lease is, in breach or default, and no event has occurred with
respect to the Company, or to Sellers' Knowledge, such other party which,
with notice or lapse of time, would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(D) the Company has not, and to the Sellers' Knowledge, no other party
to the lease has, repudiated any provision thereof;
(E) there are no disputes, oral agreements, or forbearance programs in
effect as to the lease;
(F) the Company has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold;
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(G) all facilities leased thereunder have received all approvals of
governmental authorities (including licenses and permits) required in
connection with the operation thereof and have been operated and maintained
in accordance with applicable laws, rules, and regulations in all material
respects;
(H) all facilities leased thereunder are supplied with utilities and
other services necessary for the operation of said facilities; and
(I) the owner of the warehouse located at 141 141st Street, Hammond,
Indiana and leased to the Company has good and marketable title to the
parcel of real property free and clear of any Security Interest (except for
Security Interests created solely by Alpha Steel), easement, covenant, or
other restriction, except for installments of special easements not yet
delinquent and recorded easements, covenants, and other restrictions, in
each case which do not impair the current use or occupancy of the property
subject thereto.
(m) Intellectual Property.
(i) The Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the businesses of the Company as presently
conducted. Each item of Intellectual Property owned or used by the Company
immediately prior to the Closing hereunder will be owned or available for use by
the Company on terms and conditions which are, in all material respects,
identical to the terms and conditions in effect immediately prior to the
Closing. The Company has taken all necessary action to maintain and protect each
item of Intellectual Property that it owns or uses.
(ii) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and none of the Sellers and the directors and officers
(and employees with responsibility for Intellectual Property matters) of the
Company has ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or violation
(including any claim that the Company must license or refrain from using any
Intellectual Property rights of any third party). Neither the Sellers, nor to
the Seller's Knowledge, any of the directors and officers (and employees with
responsibility for Intellectual Property matters) for the Company, has any Basis
for believing that any third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of the Company.
(iii) ss.4(m)(iii) of the Disclosure Schedule identifies each
patent or registration which has been issued to the Company with respect to any
of its Intellectual Property, identifies each pending patent application or
application for registration which the Company has made with respect to any of
its Intellectual Property, and identifies each license, agreement, or other
permission which the Company has granted to any third party with respect to any
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of its Intellectual Property (together with any exceptions). The Sellers have
delivered to the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date) and have made available to the Buyer correct and complete copies of all
other material written documentation evidencing ownership and prosecution (if
applicable) of each such item. ss.4(m)(iii) of the Disclosure Schedule also
identifies each trade name or unregistered trademark used by the Company in
connection with any of its businesses. With respect to each item of Intellectual
Property required to be identified in ss.4(m)(iii) of the Disclosure Schedule:
(A) the Company possesses all right, title, and interest in and to the
item, free and clear of any Encumbrance, except for the Permitted
Encumbrances;
(B) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending, or to the Sellers' Knowledge, is
threatened which challenges the legality, validity, enforceability, use, or
ownership of the item; and
(D) the Company has not ever agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other conflict
with respect to the item, except as provided in any license or agreement
with respect to any of its Intellectual Property to the extent such
licenses or agreements are set forth in ss.4(m) of the Disclosure Schedule.
(iv) Except for "shrink wrap" licenses relating to
non-customized software purchased by the Company for use in its operations, each
item of Intellectual Property that any third party owns and that the Company
uses pursuant to any license, sublicense, agreement, or other permission is
identified on ss.4(m)(iv) of the Disclosure Schedule. The Sellers have delivered
to the Buyer correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each item of
Intellectual Property required to be identified in ss.4(m)(iv) of the Disclosure
Schedule:
(A) the license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable, and in full force and effect;
(B) the license, sublicense, agreement, or permission will continue to
be legal, valid, binding, enforceable, and in full force and effect on
terms which are, in all material respects, substantially the same as the
terms in effect immediately prior to the consummation of the transactions
contemplated hereunder following the consummation of the transactions
contemplated hereby (including the assignments and assumptions referred to
in ss.2 above);
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(C) the Company is not, and, to the Seller's Knowledge, no other party
of such license, sublicense, agreement, or permission is in breach or
default thereunder, and to the Seller's Knowledge, no event has occurred
which with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(D) to the Seller's Knowledge, no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof;
(E) to the Seller's Knowledge, the underlying item of Intellectual
Property is not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(F) to the Seller's Knowledge, no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or is
threatened which challenges the legality, validity, or enforceability of
the underlying item of Intellectual Property; and
(G) except as set forth in ss.4(m)(iv) of the Disclosure Schedule, the
Company has not granted any sublicense or similar right with respect to the
license, sublicense, agreement, or permission.
(v) Except as set forth in ss.4(m)(v) of the Disclosure
Schedule, to the Knowledge of any of the Sellers and the directors and officers
(and employees with responsibility for Intellectual Property matters) of the
Company, the Company is not interfering with, infringing upon, misappropriating,
or in conflict with, any Intellectual Property rights of third parties as a
result of the operation of its businesses as presently conducted.
(n) Tangible Assets. ss.4(n) of the Disclosure Schedule lists all of
the Company's machinery, equipment and other tangible assets other than real
property. The Company owns or leases all buildings, machinery, equipment, and
other tangible assets necessary for the conduct of its business as presently
conducted, and each such tangible asset is free from material defects (patent
and latent), has been maintained in accordance with normal industry practice, is
in good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used.
(o) Contracts. ss.4(o) of the Disclosure Schedule lists the following
contracts and other agreements to which the Company is a party:
(i) any agreement (or group of related agreements) as of June
30, 1997 for the lease of personal property which involves annual payments in
excess of $10,000 and which may not be terminated by the Company for any reason
and without payment of any premium or penalty upon thirty (30) days' notice to
or from any Person;
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(ii) any agreement (or group of related agreements) as of June
30, 1997 for the purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or receipt of
services, the performance of which will extend over a period of more than one
year and involves the payment or receipt of any amount in excess of $10,000;
(iii) any agreement concerning the Company's investments or
equity participation in a partnership or joint venture;
(iv) any agreement (or group of related agreements) as of June
30, 1997 under which it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation which
involves the payment of any amount in excess of $10,000;
(v) any agreement concerning confidentiality, noncompetition
or other commitment limiting the ability of a party to compete in any line of
business, with any person or in any geographic area, whether for the benefit of
the Company or of a third party;
(vi) any agreement as of June 30, 1997 with any of the Sellers and
their Affiliates (other than the Company);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of the Company's current or former directors, officers, and
employees;
(viii) any collective bargaining agreement as of June 30,
1997;
(ix) any agreement as of June 30, 1997 for the employment of any
individual on a full-time, part-time, consulting, or other basis;
(x) any agreement as of June 30, 1997 under which it has advanced or
loaned any amount to any of its directors, officers, and employees;
(xi) any agreement under which the consequences of a default
or termination could have a Material Adverse Effect;
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000 and may not be
terminated by the Company for any reason and without penalty or premium upon
thirty (30) days' notice;
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(xiii) a list of all of the Customer Contracts and the status
thereof including specifically the combined job cost analysis in the form of
Exhibit ss.4(o)(c) to ss.4(o) of the Disclosure Schedule (the "Contract
Statement");
(xiv) a list of all of the Subcontracts and the status thereof
including specifically the following information with respect to each such
Subcontract: contract number, name and address of subcontractor, vendor or
supplier, a description of work to be performed thereunder, original Subcontract
price, value and description of all approved change orders, the value and
description of all unapproved change order requests by any such subcontractor,
vendor or supplier, subcontract billings to date by any such subcontractor,
vendor or supplier, and payments made by the Company to such subcontractor,
vendor or supplier to date (the "Subcontract Statement");
(xv) each other agreement, contract, or commitment (other than
Customer Contracts not listed on ss.4(o)(xv) of the Disclosure Schedule) which
contain terms providing for the termination, default, loss of rights or
privileges, acceleration of payment, or any other change in the terms or
conditions of such document upon the sale or exchange of a majority of the
common stock of the Company or upon any change in control of the Company, except
where any such termination, default, loss of rights or privileges, acceleration
of payment or other change in terms or conditions would not have a Material
Adverse Effect.
The Sellers have delivered or provided to the Buyer (or its
representatives) a correct and complete copy of each written agreement listed in
ss.4(o) of the Disclosure Schedule (as amended to date) that was in existence as
of June 30, 1997 and a written summary, contained in ss.4(o) of the Disclosure
Schedule, setting forth the terms and conditions of each oral agreement referred
to in ss.4(o) of the Disclosure Schedule and, for such contracts entered into
after June 30, 1997, will make available a copy of each such agreement, or a
written summary thereof in the case of oral agreements. With respect to each
such agreement: (A) the agreement is legal, valid, binding, enforceable, and in
full force and effect; (B) the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby (except for breaches or
modifications involving acts or conduct of the Company after the Closing Date);
(C) the Company is not, and to Seller's knowledge, no other party thereto is, in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) the Company has not, and to Seller's
Knowledge, no other party has, repudiated any provision of the agreement.
(p) Notes and Accounts Receivable. All notes and accounts receivable of
the Company are reflected properly on its books and records, and, except for the
Officer Loans, (i) arose out of bona fide, arms' length transactions, (ii) are
in all material respects valid receivables subject to no setoffs or
counterclaims, (iii) are current and collectible, and (iv) will be collected in
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accordance with their terms at their recorded amounts, subject only to the
reserve for bad debts set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) and those reserves set forth in ss.4(p) of
the Disclosure Schedule, as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Company.
(q) Unbilled Revenues. All of the unbilled revenue and disbursements
reflected in the Most Recent Financial Statements have been properly determined
on a basis consistent with applicable contract terms and such amounts will
become good and collectible accounts receivable in the Ordinary Course of
Business.
(r) Powers of Attorney. Other than as set forth in ss.4(r) of the
Disclosure Schedule, there are no outstanding powers of attorney executed on
behalf of the Company.
(s) Insurance. ss.4(s) of the Disclosure Schedule describes any
self-insurance arrangements affecting the Company, whether underwritten
individually by the Company or jointly with others. ss.4(s) of the Disclosure
Schedule also sets forth the following information with respect to such
self-insurance arrangements and each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Company has been a party, a named
insured, or otherwise the beneficiary of coverage at any time within the past 3
years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such self-insurance arrangement and insurance policy: (A)
the arrangement or policy is legal, valid, binding, enforceable, and in full
force and effect in accordance with its express terms; (B) the arrangement or
the policy will continue to be legal, valid, binding, enforceable, and in full
force and effect on terms that following the consummation of the transactions
contemplated hereby are, in all material respects, substantially the same as the
terms in effect immediately prior to the consummation of the transactions
contemplated hereunder; (C) neither the Company nor, to Sellers' knowledge, any
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other party to the arrangement or the policy, is in breach or default (including
with respect to the payment of premiums or the giving of notices), and no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default by the Company, or, to Sellers' knowledge, a breach or default
by any other party to the arrangement or the policy, or permit termination,
modification, or acceleration, under the arrangement or the policy; and (D)
neither the Company nor, to the Sellers' knowledge, any other party to the
arrangement or the policy, has repudiated any provision thereof. The Company has
been covered during the past 6 years by insurance in scope and amount customary
and reasonable for the businesses in which it has engaged during the
aforementioned period.
(t) Litigation. ss.4(t) of the Disclosure Schedule sets forth each
instance in which the Company (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
Knowledge of any of the Sellers and the directors and officers (and employees
with responsibility for litigation matters) of the Company, is threatened to be
made a party to any action, suit, proceeding, hearing, or investigation of, in,
or before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. None of the
Sellers and the directors and officers (and employees with responsibility for
litigation matters) of the Company has knowledge of any Basis for any such
action, suit, proceeding, hearing, or investigation to be brought or threatened
against the Company other than those listed on ss.4(t) of the Disclosure
Schedule. ss.4(t) of the Disclosure Schedule also sets forth the Company's
reserves for each of the actions, suits, proceedings, hearings, and
investigations that it has recorded on its books and records and reported on the
balance sheet of its Most Recent Financial Statements (not including the notes
thereto).
(u) Warranty. Each product manufactured, sold, leased, or delivered by
the Company and each service rendered by the Company has been in conformity in
all material respects with all applicable contractual commitments and all
express and implied warranties, and the Company has no Liability that would have
a Material Adverse Effect (and to Seller's Knowledge there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Company that would give rise to any
Liability that would have a Material Adverse Effect) for replacement or repair
thereof or other damages in connection therewith, subject only to the reserve
for warranty claims set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto). Except as set forth in ss.4(u) of the
Disclosure Schedule, no product manufactured, sold, leased, or delivered by the
Company and no service rendered by the Company is subject to any guaranty,
warranty, or other indemnity beyond the applicable standard terms and
conditions. ss.4(u) of the Disclosure Schedule includes copies of the standard
terms and conditions for the Company (containing applicable guaranty, warranty,
and indemnity provisions).
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(v) Liability. Except as disclosed in ss.4(v) of the Disclosure
Schedule and except for any Liabilities which, individually or in the aggregate,
would not have a Material Adverse Effect, the Company has no Liability (and, to
Seller's knowledge, there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
the Company that would give rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, leased, or delivered by the Company and any service
rendered by the Company.
(w) Employees. ss.4(w) of the Disclosure Schedule lists each employee
of the Company and each employee's respective job title or position and current
salary. To the knowledge of any of the Sellers and the directors and officers
(and employees with responsibility for employment matters) of the Company, no
executive, key employee, or group of employees has any plans to terminate
employment with the Company. Except as set forth in ss.4(w) of the Disclosure
Schedule, consummation of the transactions contemplated by this Agreement will
not (A) entitle any Person to severance pay, unemployment compensation, or any
similar compensation, (B) accelerate any time of payment or vesting or increase
the amount of any compensation due to any Person, or (C) entitle any Person to
any parachute payment within the meaning of Section 280G of the Code. The
Company has not incurred or reasonably expects to incur any liability or
obligation under the Workers Adjustment Retraining Notification Act or any
similar state law ("WARN"); and within the six month period immediately
following the Closing Date, the Company and no Person who together with whom the
Company would be treated as an "employer" for purposes of WARN will incur any
such liability if, during such six month period, only terminations of employment
of not more than 50 employees occur in the normal course of operations.
(x) Collective Bargaining Agreements. Except as set forth on ss.4(x) of
the Disclosure Schedule, the Company is not a party to, bound by or currently
negotiating any collective bargaining agreement or any other agreement with a
labor union. There is not pending or, to the Knowledge of the Sellers,
threatened, any labor dispute, strike, work stoppage, grievance, claim of unfair
labor practices, or other collective bargaining disputes. The Company has not
committed any unfair labor practice.
(y) Employee Benefits.
(i) ss.4(y) of the Disclosure Schedule lists each Employee
Benefit Plan that the Company maintains or to which the Company contributes.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract,
or fund) complies in form and in operation in all respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
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(B) All required reports and descriptions (including
Form 5500 Annual Reports,
Summary Annual Reports, PBGC-1's, and Summary Plan Descriptions) have been filed
or distributed appropriately with respect to each such Employee Benefit Plan.
The requirements of Part 6 of Subtitle B of Title I of ERISA and of Code
ss.4980B have been met with respect to each such Employee Benefit Plan which is
an Employee Welfare Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary
reduction contributions) which are due have been paid to each such Employee
Benefit Plan which is an Employee Pension Benefit Plan and all contributions for
any period ending on or before the Closing Date which are not yet due have been
paid to each such Employee Pension Benefit Plan or accrued in accordance with
the past custom and practice of the Company. All premiums or other payments for
all periods ending on or before the Closing Date have been paid with respect to
each such Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan"
under Code ss.401(a) and has received, within the last two years,
a favorable determination letter from the Internal Revenue
Service.
(E) The market value of assets under each such
Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer Plan) equals or
exceeds the present value of all vested and nonvested Liabilities thereunder
determined in accordance with PBGC methods, factors, and assumptions applicable
to an Employee Pension Benefit Plan terminating on the date for determination.
(F) The Sellers have delivered to the Buyer correct
and complete copies of the
plan documents and summary plan descriptions, the most recent determination
letter received from the Internal Revenue Service, the most recent Form 5500
Annual Report, and all related trust agreements, insurance contracts, and other
funding agreements which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that the
Company, and the Controlled Group of Corporations which includes the Company
maintains or ever has maintained or to which any of them contributes, ever has
contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is an Employee Pension Benefit Plan
(other than any Multiemployer Plan) has been completely or partially
terminated or been the subject of a reportable event, within the meaning
set forth in ERISA ss.4043, as to which notices would be required to be
filed with the PBGC. No proceeding by the PBGC to terminate any such
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Employee Pension Benefit Plan (other than any Multiemployer Plan) has been
instituted or threatened.
(B) There have been no prohibited transactions, within the meaning set
forth in ERISA ss.406 and Code ss.4975, with respect to any such Employee
Benefit Plan. No fiduciary, within the meaning set forth in ERISA ss.3(21),
has any Liability for breach of fiduciary duty or any other failure to act
or comply in connection with the administration or investment of the assets
of any such Employee Benefit Plan. No action, suit, proceeding, hearing, or
investigation with respect to the administration or the investment of the
assets of any such Employee Benefit Plan (other than routine claims for
benefits) is pending or, to the Seller's Knowledge, threatened. None of the
Sellers and the directors and officers (and employees with responsibility
for employee benefits matters) of the Company has any Knowledge of any
Basis for any such action, suit, proceeding, hearing, or investigation.
(C) The Company has not incurred, and none of the Sellers and the directors
and officers (and employees with responsibility for employee benefits
matters) of the Company has any reason to expect that the Company will
incur, any Liability to the PBGC (other than PBGC premium payments) or
otherwise under Title IV of ERISA (including any withdrawal Liability) or
under the Code with respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
(iii) The Company and the other members of the Controlled
Group of Corporations that includes the Company has not contributed to, never
has contributed to, and never has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal Liability) under
any Multiemployer Plan.
(iv) The Company does not maintain and has never maintained,
does not contribute and has never contributed, or ever has been required to
contribute to any Employee Welfare Benefit Plan providing medical, health, or
life insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses, or their dependents (other than in
accordance with Code ss.4980B).
(z) Guaranties. Except as set forth in ss.4(z) of the Disclosure
Schedule, the Company is not a guarantor or otherwise is liable for any
Liability or obligation (including indebtedness) of any other Person other than
as endorser of checks received by it and deposited in the Ordinary Course of
Business.
(aa) Environment, Health, and Safety.
(i) The Company and its predecessor Persons and Affiliates
have complied in all material respects with all Environmental, Health, and
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Safety Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply. Without limiting the generality of the
preceding sentence, the Company and its predecessor Persons and Affiliates have
obtained and been in compliance in all material respects with all of the terms
and conditions of all permits, licenses, and other authorizations which are
required under, and has complied in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all
Environmental, Health, and Safety Laws.
(ii) The Company has no Liability (and none of the Company and
its Affiliates has handled, transported, stored, treated or disposed of any
substance, arranged for the disposal of any substance, exposed any employee or
other individual to any substance or condition, allowed or arranged for any
third person to transport, store, treat, or dispose of waste, (including, but
not limited to asbestos or asbestos-containing materials), to or at (1) any
location other than a site lawfully permitted to receive such waste for such
purposes or (2) any location designated for remedial action pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act, as from
time to time amended, or any similar federal or state statute assigning
responsibility for the cost of investigating or remediating releases of
contaminants into the environment; nor has the Company performed, arranged for,
or allowed by any method or procedure, such transportation or disposal in
contravention of state or federal laws and regulations or in any other manner
which gives rise to any Liability whatsoever; and the Company has not disposed,
nor has it allowed or arranged for third parties to dispose, of waste upon
property ever owned or leased by it, except as permitted by law and except as
disclosed in the Existing Reports. Without limiting the generality of the
foregoing, except as set forth in ss.4(aa)(ii) of the Disclosure Schedule, the
Company has not received any notification (including requests for information
directed to it) from any governmental agency asserting that it is or may be a
"potentially responsible person" for a remedial action at a waste storage,
treatment, or disposal facility, pursuant to the provisions of CERCLA, or any
similar federal or state statute assigning responsibility for the costs of
investigating or remediating releases or contaminants into the environment.
There has been no release (for the purpose of any applicable environmental law)
of any hazardous waste or hazardous substance on, into, or beneath any real
property owned or leased by the Company, and the Company does not have any
Liability, whether known or unknown, for any remedial or corrective action on
any real property. The Company has not owned or operated any property or
facility in any manner that could form the Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against the Company giving rise to any Liability) for damage to any site,
location, or body of water (surface or subsurface), for any illness of or
personal injury to any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
(iii) All properties and equipment used in the business of the
Company and its predecessors and Affiliates have been free of asbestos, asbestos
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containing materials, lead, lead containing materials, PCB's, methylene
chloride, trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans,
and extremely hazardous substances, within the meaning set forth in ss.302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
(bb) Certain Business Relationships with the Company. Except as
otherwise set forth in ss.4(bb) of the Disclosure Schedule and except for
employment as an employee of the Company, none of the Sellers or their
Affiliates has been involved in any business arrangement or relationship with
the Company within the past 12 months, and none of the Sellers or their
Affiliates owns any asset, tangible or intangible, which is used in the business
of the Company.
(cc) Conformance with Standard of Care. The performance by the Company
of all services with respect to the Customer Contracts has been conducted in all
material respects in accordance with all applicable industry standards at the
time and within the locality where the services were performed including,
without limitation, compliance in all material respects with all applicable
laws, regulations, and standards governing the provision of such services.
(dd) Relationships with Customers. Except as set forth in ss.4(dd) of
the Disclosure Schedule, no customer of the Company, which for the twelve (12)
month period ending June 30, 1997, accounted for more than two percent (2%) of
the total revenue for the Company, has (1) refused to honor any of its
commitments, (2) presented the Company with written information indicating
dissatisfaction with the quality or price of the Company's services, or (3)
indicated that it would not renew any existing vendor agreement, maintenance
agreement or blanket purchase order or that it would generally not continue
doing business with the Company on a basis similar to that previously conducted.
(ee) Disclosure. The representations and warranties (as supplemented by
the Disclosure Schedule) contained in this ss.4 do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements and information contained in this ss.4 not
misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in ss.7 below).
(b) Notices and Consents. The Sellers will obtain the Required Consents
as set forth in ss.5(b) of the Disclosure Schedule. The Sellers will cause the
Company to give any notices to third parties, and will cause the Company to use
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its reasonable best efforts to obtain any third party consents, that the Buyer
may reasonably request in connection with the matters referred to in ss.4(c)
above. Each of the Parties will (and the Sellers will cause the Company to) give
any notices to, make any filings with, and use its reasonable best efforts to
obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in ss.3(a)(ii),
ss.3(b)(ii), and ss.4(c) above.
(c) Operation of Business. Except as expressly provided for in this
Agreement, the Sellers will not cause or permit the Company to engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing, except as
expressly provided for in this Agreement, the Sellers will not cause or permit
the Company to (i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or otherwise
acquire any of its capital stock, (ii) declare, set aside, agree to pay or pay
any bonus or other compensation outside the Ordinary Course of Business, (iii)
loan, guaranty or agree to loan or guaranty any amount to any of the Sellers or
third party; or (iv) otherwise engage in any practice, take any action, or enter
into any transaction which would be required to be disclosed under ss.4(h)
above.
(d) Preservation of Business. The Sellers will cause the Company to use
its reasonable best efforts to keep its business and properties substantially
intact, including its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers, customers, and
employees, consistent with past custom and practice.
(e) Full Access. Each of the Sellers will permit, and the Sellers will
cause the Company to permit, representatives of the Buyer to have full access at
all reasonable times, to all premises, properties, personnel, books, records
(including Tax records), contracts, and documents of or pertaining to the
Company.
(f) Notice of Developments. The Sellers will give prompt written notice
to the Buyer of any material adverse development of which any of them become
aware that causes a breach of any of the representations and warranties in ss.4
above. Each Party will give prompt written notice to the others of any material
adverse development of which any of them become aware that causes a breach of
any of his or its own representations and warranties in ss.3 above. No
disclosure by any Party pursuant to this ss.5(f), however, shall be deemed to
amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(g) Exclusivity. Until such time as this Agreement shall have been
terminated, none of the Sellers will (and the Sellers will not cause or permit
the Company to) (i) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any capital
stock or other voting securities, or any substantial portion of the assets of,
the Company (including any acquisition structured as a merger, consolidation, or
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share exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing. Until such time as this Agreement shall have been
terminated none of the Sellers will vote their Shares in favor of any such
acquisition structured as a merger, consolidation, or share exchange. During the
term hereof, the Sellers will notify the Buyer immediately if any Person makes
any proposal, offer, inquiry, or contact with respect to any of the foregoing.
(h) Title Insurance. The Sellers will cause the Company to obtain the
following title insurance commitments, policies, and riders in preparation for
the Closing: with respect to each parcel of real estate that the Company owns,
an ALTA Owner's Policy of Title Insurance Form B-1987 (or equivalent policy
reasonably acceptable to the Buyer if the real property is located in a state in
which an ALTA Owner's Policy of Title Insurance Form B-1987 is not available)
issued by a title insurer reasonably satisfactory to the Buyer (and, if
requested by the Buyer, reinsured in whole or in part by one or more insurance
companies and pursuant to a direct access agreement reasonably acceptable to the
Buyer), in such amount as the Buyer may reasonably determine to be the fair
market value of such real property (including all improvements located thereon),
insuring title to such real property to be in the Company as of the Closing
(subject only to the Permitted Encumbrances).
Each title insurance policy delivered under this ss.5(h) shall (A)
insure title to the real property and all recorded easements benefiting such
real property, (B) contain an "extended coverage endorsement" insuring over the
general exceptions contained customarily in such policies, (C) contain an ALTA
Zoning Endorsement 3.1 (or equivalent), if available, (D) contain an endorsement
insuring that the real property described in the title insurance policy is the
same real estate as shown on the survey delivered with respect to such property
(the "Survey"), (E) contain an endorsement insuring that each street adjacent to
the real property is a public street and that there is direct and unencumbered
pedestrian and vehicular access to such street from the real property, (F) if
the real property consists of more than one record parcel, contain a
"contiguity" endorsement insuring that all of the record parcels are contiguous
to one another, and (G) contain a "non-imputation" endorsement to the effect
that title defects known to the officers, directors, and stockholders of the
owner prior to the Closing shall not be deemed "facts known to the insured" for
purposes of the policy, if available.
(i) Termination of Agreements. The Sellers will cause the Company to
terminate all of its agreements regarding, and obtain a release from liability
related to (i) the Company's guaranty of indemnity agreements for bonding
purposes of Persons other than the Company including, but not limited to, CUBS
Construction and Golf Corporation; (ii) employment agreements with Michael J.
Chakos, Ted Choucalas, Michael Choucalas, Marian Herndon and Dennis Herndon;
(iii) deferred compensation agreements with Mark F. Manta, Leo J. Manta, Steven
A. Manta and Ernest Maneaty; and (iv) security interests securing obligations of
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the Company to Mark F. Manta, collateralized in part by a pledge of the Shares
owned by Leo J. Manta and Steven A. Manta. In addition, the Sellers will
terminate any existing agreements by, among or between the Sellers relating to
securities of the Company.
(j) Related Party Agreements.
(i) The Sellers will cause the Company to deliver to the Buyer
an acknowledgment signed by duly authorized officers of each of Golf Corporation
and CUBS Construction that the Company's arrangement and agreement with such
parties for the Company to provide accounting, safety and other services is an
"at will" arrangement and is terminable at any time, with or without cause, by
either the Company or such party. The Sellers will cause (i) all outstanding
amounts owed to the Company from Golf Corporation, CUBS Construction, or any
other corporation, partnership, trust or other entity in which any of the
Sellers, any officers, directors or employees of the Company, or the Associates
of any of the foregoing have an interest, as listed on ss.5(j) of the Disclosure
Schedule and (ii) all outstanding amounts owed to the Company from the
individuals or entities, and in the amounts, listed on ss.5(j) of the Disclosure
Schedule (collectively, the "Seller Receivables"), to be paid in full at or
prior to the Closing. In the event that such Seller Receivables are not paid in
full at or prior to Closing, the amount of any outstanding Seller Receivables
shall be offset from the cash portion of the Purchase Price pursuant to ss.2(b).
(ii) The Sellers will cause the Company to deliver to the
Buyer evidence of the termination of insurance and bonding coverage for Golf
Corporation, CUBS Construction, and any other entities which are not an
Affiliate of the Company and the Sellers shall deliver to the Buyer an indemnity
agreement, reasonably satisfactory in form and substance to Buyer, in which each
of CUBS Construction, Inc. ("CUBS") and Golf Corporation ("Golf") shall
indemnify the Buyer for any Adverse Consequences resulting from, arising out of
relating to or caused by (i) any uninsured claims arising out of or relating to
the business or operations of CUBS or Golf; (ii) any amounts which the Company
is required to pay pursuant to the insurance program with United Trades
Insurance Company as the result of any claims arising out of or relating to the
business or operations of CUBS or Golf; and (iii) any guarantees by the Company
of any bonds issued for Golf Corporation and CUBS Construction as principals.
(iii) The Sellers shall cause the Company to deliver an
Assignment and Assumption Agreement, in a form reasonably acceptable to Buyer
(the "Assignment Agreement"), duly executed by the Company and the officers of
Riff-Raff, Inc., as agent for Lake County Trust Company (the "Landlord"), which
shall assign to the Company all of the rights of JMLI of Indiana, Inc. under its
lease with the Landlord for the aforementioned property and in which the Company
shall assume all of the obligations under such lease. The Assignment Agreement
shall further provide (i) an acknowledgment by the Landlord that such lease is
in full force and effect; (ii) a representation that the tenant thereunder is
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not in default under the lease, (iii) an acknowledgment that the landlord is and
shall be responsible for any remediation required pursuant to any remediation of
conditions identified in the Existing Reports and (iv) an agreement in which the
Landlord agrees to indemnify, defend and hold the Company and the Buyer harmless
from and against any Liability for such remediation. Notwithstanding the
foregoing, any liability of Landlord for a violation of Environmental, Health
and Safety Laws with respect to the warehouse located at 141 141st Street,
Hammond, Indiana, shall cease upon the sale of such property to Buyer.
(iv) The Sellers will cause the Company to deliver to the
Buyer a written instrument executed by Mark F. Manta (the "Mark F. Manta
Waiver") (A) waiving his rights to mandatory pre-payment of certain amounts
required to be paid to him pursuant to his Redemption Agreement and Consulting
Agreement with the Company (B) consenting to this Agreement and the transactions
contemplated hereby and (C) acknowledging that the annual periodic payments due
to him pursuant to such agreements may be continued to be made after the Closing
in full satisfaction of the Company's obligations to him thereunder.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action
is reasonably necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under ss.8 below). The
Sellers acknowledge and agree that from and after the Closing the Buyer will be
entitled to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Company.
Notwithstanding the foregoing, after the Closing, the Buyer shall provide to
Sellers, on a timely basis upon written request, the information reasonably
required by Sellers in connection with the preparation of Sellers' tax returns
for periods prior to the Closing Date.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any claim brought under or pursuant to this Agreement or any of Sellers'
Transaction Documents or Buyer's Transaction Documents or otherwise in
connection with any of the transactions contemplated under this Agreement or any
of the Sellers' Transaction Documents or Buyer's Transaction Documents or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
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occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company or any Seller, each of the other
Parties will cooperate with him or it and his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefor under ss.8 below).
(c) Transition. Prior to the Closing and during the Non-Compete Period,
none of the Sellers will take any action that is intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business
associate of the Company from maintaining the same business relationships with
the Company after the Closing as it maintained with the Company prior to the
Closing. During the Non-compete Period, each of the Sellers will refer all
customer inquiries received by them relating to the businesses of the Company to
the Buyer from and after the Closing.
(d) Confidentiality. Each of the Sellers will treat and hold as
confidential all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which are
in his or its possession. In the event that any of the Sellers is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, that Seller will notify the
Buyer promptly of the request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
ss.6(d). If, in the absence of a protective order or the receipt of a waiver
hereunder, any of the Sellers is, on the advice of counsel, compelled or
required by applicable law to disclose any Confidential Information to any
tribunal , that Seller may disclose the Confidential Information to the
tribunal; provided, however, that the disclosing Seller shall use his or its
reasonable best efforts to obtain, at the request and sole expense of the Buyer,
an order or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as the Buyer
shall designate. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to the
time of disclosure.
(e) Amendment Approval. Promptly following the Closing the Buyer shall
take, at its sole expense, all appropriate and necessary action to seek all
approvals required under its bylaws, corporate charter and/or under all
applicable laws, rules and regulations (including applicable federal and state
securities laws and exchange or NASDAQ rules and regulations) for it to amend
its corporate charter to provide for an amount of Buyer's authorized but
unissued shares of Buyer Common Stock equal to or greater than the Sufficient
Buyer Common Stock Amount (the "Amendment"), as adjusted pursuant to the terms
of the Convertible Securities. Such Sufficient Buyer Stock Amount may be
obtained by an increase in the number of the Buyer's authorized but unissued
shares, by stock split or reverse stock split, or by any other method deemed
appropriate by Buyer. Without limiting the generality of the foregoing, the
Buyer shall take all necessary and appropriate action required for such
Amendment, including, without limitation, establishing a meeting date for a
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meeting of its shareholders to vote on and approve such Amendment, establishing
a record date for such meeting and preparing and mailing proxy materials for
such meeting and soliciting proxies from its shareholders to vote in favor of
such Amendment. Buyer agrees that the approval of the Amendment will be included
on the agenda of the Buyer's first stockholders' meeting following the Closing,
which meeting shall be held no later than June 30, 1998 (the "Approval
Deadline"). Although the parties acknowledge that Buyer cannot insure that the
Amendment will be approved, Buyer does hereby agree to use its reasonable best
efforts to obtain approval of the Amendment. The Board of Directors of the
Company will recommend to its stockholders that such Amendment be approved.
In the event that the Amendment is not approved or is not effective by
the Approval Deadline, Buyer covenants and agrees to implement another form of
incentive compensation or stock appreciation rights (collectively, the
"Alternative Compensation Agreements"), reasonably acceptable to the Requisite
Sellers and the Buyer, which would give the Sellers substantially the same
financial benefits as the financial benefits of the Convertible Securities. In
the case of the Additional Stock Option Agreements, the financial benefits of
such Alternative Compensation Agreements shall vest over the same period of time
as the Additional Stock Option Agreements, shall have an effective term of not
less than ten (10) years, shall be based on the value of the options granted
pursuant to the Additional Stock Option Agreement and shall be subject to the
all limitations set forth therein, including restrictions on the time and manner
of exercise.
(f) Maintaining Sufficient Buyer Common Stock Amount. From and after
the date of approval of the Amendment and for so long as any amounts remain
outstanding under any of the Convertible Promissory Notes or Retention Bonus
Agreements and/or any options remain outstanding under any of the Stock Option
Agreements or Additional Stock Option Agreements, Buyer shall have available for
issuance an amount of shares of Buyer Common Stock equal to the Sufficient Buyer
Common Stock Amount.
(g) Covenant Not to Compete. Each Seller agrees that during its
Non-Compete Period, it shall not engage directly or indirectly in any business
that the Company conducts as of the Closing Date; provided, however, that no
owner of less than 3% of the outstanding stock of any publicly traded
corporation shall be deemed to engage solely by reason thereof in any of its
businesses, and provided further that the ownership of the securities of the
Buyer shall not constitute a breach of this Section. If the final judgment of a
court of competent jurisdiction declares that any term or provision of this
ss.6(g) is invalid or unenforceable, then the Parties agree that the court
making the determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
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closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed. Provided,
however, the ownership of the entities set forth in ss.6(g) to the Disclosure
Schedule shall not be deemed to violate the foregoing covenant.
(h) Convertible Promissory Notes. The conversion rights set forth in
the Convertible Promissory Notes shall be exercisable only in the event that the
Buyer then shall have sufficient authorized capital stock to issue to the
Sellers in conversion of payments due to them thereunder. Each Convertible
Promissory Note will be imprinted with a legend substantially in the following
form:
The payment of principal and interest on this Note is subject to
certain recoupment provisions set forth in a Stock Purchase Agreement dated as
of September 30, 1997 (the "Purchase Agreement") among the issuer of this Note,
the person to whom this Note originally was issued, and certain other persons.
This Note was originally issued on November 10, 1997, and has not been
registered under the Securities Act of 1933, as amended. The transfer of this
Note is subject to certain restrictions set forth in the Purchase Agreement. The
issuer of this Note will furnish a copy of these provisions to the holder hereof
without charge upon written request.
Each holder desiring to transfer a Convertible Promissory Note first must
furnish the Buyer with (i) a written opinion satisfactory to the Buyer in form
and substance from counsel satisfactory to the Buyer by reason of experience to
the effect that the holder may transfer the Convertible Promissory Note as
desired without registration under the Securities Act.
(i) Retention Bonus Agreements. On the Closing Date the Company shall
enter into Retention Bonus Agreements in the form of Exhibit B attached hereto
with certain key employees of the Company (the "Retention Bonus Agreements").
The Requisite Sellers shall determine the employees of the Company to enter into
such Retention Bonus Agreements and to be paid such bonuses and the amount of
each such employee's bonus. The aggregate amount of all bonuses pursuant to the
Retention Bonus Agreements shall be Nine Hundred Thousand Dollars ($900,000),
and the Buyer agrees to make available the aggregate amount of Nine Hundred
Thousand Dollars ($900,000) for the payment of bonuses pursuant to such
Retention Bonus Agreements. On the Closing Date the Buyer shall pay to the
Company in immediately available funds the aggregate amount of Six Hundred
Thirty-five Thousand, Two Hundred Ninety-One and 99/100 Dollars ($635,291.99)
for the purpose of the Company paying bonuses on the Closing Date pursuant to
the Retention Bonus Agreements. The payment of such bonuses on the Closing Date,
the withholding of appropriate federal, state and local taxes, and all other
employer obligations related to such bonuses shall be the obligation of the
Company. The Retention Bonus Agreements shall provide that the remaining bonus
amount of Two Hundred Sixty-four Thousand, Seven Hundred Eight and 01/100
Dollars ($264,708.01) shall be paid quarterly in equal quarterly installments
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over a three (3) year period subsequent to the Closing Date, and payments shall
be convertible at the election of the holder thereof into voting no par value
common stock of the Buyer; provided, however, that such conversion rights shall
be exercisable only in the event that the Buyer then shall have sufficient
authorized capital stock to issue to such holders in conversion of payments due
to them thereunder.
(j) Stock Option Agreements. On the Closing Date the Buyer agrees to
issue to the Sellers, in the aggregate, options to purchase Three Hundred
Thousand (300,000) shares of the voting no par value common stock of the Buyer
(the "Stock Option Agreements"). In addition, the Buyer agrees to issue to the
Sellers, in the aggregate, options to purchase Two Hundred Thousand (200,000)
shares of the voting no par value common stock of the Buyer (the "Additional
Stock Option Agreements") when the Buyer has obtained the sufficient Buyer
Common Stock Amount (subject to the qualifications set forth in ss.6(e));
provided, however, that the Buyer shall not have any obligation to issue
securities pursuant to the Additional Stock Option Agreements in the event it
has implemented Alternative Compensation Agreements in lieu thereof pursuant to,
and in accordance with, the terms and conditions of ss.6(e) hereof. Buyer shall,
on or before the date on which any options under the Stock Option Agreements or
Additional Stock Option Agreements, as applicable, become exercisable, file and
have effective with the SEC a registration statement on Form S-8 covering the
stock and the options relating to each of the Stock Option Agreements and any
Additional Stock Option Agreements granted pursuant to ss.6(j). The Stock Option
Agreements and the Additional Stock Option Agreements shall be in the form of
Exhibit C attached hereto, shall have an exercise price equal to $0.34 per
share, and shall vest over a three (3) year period subsequent to the Closing
Date, at a rate a one-third (1/3) of the total number of options per year. The
employees of the Company to be issued the Stock Option Agreements and the
Additional Stock Option Agreements and the number of options to be issued to
each such employee is listed on ss.6(j) of the Disclosure Schedule. The
Requisite Sellers shall provide to the Buyer in writing, not less than three (3)
business days prior to the Closing Date, a list of the employees of the Company
to be issued the Stock Option Agreements and the Additional Stock Option
Agreements, together with the number of options to be issued to each such
employee.
(k) Employment and Consulting Agreements. Each of Leo J. Manta, John L.
Manta, Michael J. Chakos, Jon S. Claypool, Mike Choucalas, Ted Choucalas and
Allan DeLange shall enter into an Employment Agreement with the Company in form
and substance as set forth in Exhibit E-1 through E-7 attached hereto,
respectively, for a term of three (3) years each in the case of the Employment
Agreements of Leo J. Manta, John L. Manta, Michael J. Chakos, Jon S. Claypool
and Allan DeLange, and for a term of one (1) year each in the case of the
Employment Agreements of Mike Choucalas and Ted Choucalas (the "Employment
Agreements") with the title and salary set forth opposite his name on ss.6(k) of
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the Disclosure Schedule, and Steven A. Manta shall enter into a Consulting
Agreement with the Company in form and substance as set forth in Exhibit L for a
term of one (1) year (the "Consulting Agreement").
(l) Actions to Allow the Nomination of Michael J. Chakos to the Board
of Directors of Buyer. Buyer shall use its reasonable best efforts to assure the
addition of one (1) seat on Buyer's Board of Directors and to assure that
Michael J. Chakos be included as part of Buyer's slate of directors to be
recommended for election by the stockholders of Buyer at each annual meeting of
stockholders of Buyer which includes the election of directors for any term of
office included in the next three (3) years after the Closing Date; provided
that such increase in the size of Buyer's Board of Directors and the nomination
and election of Michael S. Chakos shall be subject to the approvals of the
Buyer's Board of Directors and Stockholders. The foregoing obligation shall
cease and expire on the third anniversary of the Closing Date.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.3(a)
and ss.4 above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Sellers shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing;
(iii) the Company shall have procured all of the Required
Consents, all of the title insurance commitments, policies, and riders specified
in ss.5(h) above, and all of the surveys specified in ss.5(h) above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of the Buyer to own the
Shares and to control the Company, or (D) have a Material Adverse Effect upon
the right of the Company to own its assets and to operate its businesses (and no
such injunction, judgment, order, decree, ruling, or charge shall be in effect);
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(v) the Sellers shall have delivered to the Buyer a
certificate, duly executed by each Seller, to the effect that each of the
conditions specified above in ss.7(a)(i)-(iv) is satisfied in all respects;
(vi) John L. Manta shall have entered into an Employment
Agreement in the form of Exhibit E-1 attached hereto, Michael J. Chakos shall
have entered into an Employment Agreement in the form of Exhibit E-2 attached
hereto, Leo J. Manta shall have entered into an Employment Agreement in the form
of Exhibit E-3 attached hereto, Allan DeLange shall have entered into an
Employment Agreement in the form of Exhibit E-4 attached hereto, Jon S. Claypool
shall have entered into an Employment Agreement in the form of Exhibit E-5
attached hereto, Ted Choucalas shall have entered into an Employment Agreement
in the form of Exhibit E-6 attached hereto, Mike Choucalas shall have entered
into an Employment Agreement in the form of Exhibit E-7 attached hereto, and
Steven A. Manta shall have entered into a Consulting Agreement in the form of
Exhibit L attached hereto.
(vii) each of the Sellers shall have executed and delivered to
the Buyer a General Release in favor of the Company in form and substance as set
forth in Exhibit F attached hereto (the "General Release"), and the same shall
be in full force and effect;
(viii) each of the Sellers shall have entered into a
Registration Rights Agreement with the Buyer in form and substance as set forth
in Exhibit G attached hereto (the "Registration Rights Agreement"), and the same
shall be in full force and effect;
(ix) the Buyer shall have received from counsel to the Sellers
an opinion in form and substance as set forth in Exhibit H attached hereto,
addressed to the Buyer, and dated as of the Closing Date, subject to such
changes as may be reasonably made by the legal opinion committee of counsel to
Sellers, which changes shall be reasonably acceptable to counsel to Buyer;
(x) the Buyer shall have received the resignations, effective
as of the Closing, of each director and officer of the Company other than those
whom the Buyer shall have specified in writing at least five (5) business days
prior to the Closing;
(xi) The Company shall have terminated and obtained
appropriate releases in form and substance acceptable to the Buyer in its sole
and absolute discretion of the following: (1) guaranties of indemnity agreements
for bonding purposes of Persons other than the Company, including, but not
limited to, any and all guaranties of obligations of CUBS Construction, Inc. and
Golf Corporation including, but not limited to, bond guaranties, and any and all
other guaranties, (2) existing employment agreements with Michael J. Chakos,
Marian Herndon, Dennis Herndon, Michael Choucalas and Ted Choucalas, (3)
deferred compensation agreements with Mark F. Manta, Steven A. Manta, Leo J.
Manta and Ernest Maneaty, (4) all security interests in and pledges of the
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Shares including, but not limited to, pledges of certain of the Shares to Mark
F. Manta and (5) any existing agreements by, among, or between the Sellers
relating to securities of the Company, other than the Company's By-laws and
Articles of Incorporation (provided that any and all transfer restrictions set
forth in such By-laws and Articles of Incorporation shall have been waived by
all of the Sellers and the Company prior to the Closing Date);
(xii) all actions to be taken by the Sellers in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to be provided by the
Company and/or the Sellers in order to effect the transactions contemplated
hereby will be reasonably satisfactory in form and substance to the Buyer;
(xiii) The Sellers shall have delivered the acknowledgments of
Golf Corporation and CUBS Construction required pursuant to ss.5(j)(i) hereof
and the condition regarding the payment of the Seller Receivables at Closing, as
referenced in ss.5(j)(i) shall have been satisfied;
(xiv) The Sellers shall have delivered the Assignment
Agreement regarding the lease of the warehouse located at 141 141st Street,
Hammond, Indiana required pursuant to ss.5(j)(iii) hereof and the same shall be
in full force and effect;
(xv) The Sellers shall have delivered the Mark F. Manta Waiver;
(xvi) The Sellers shall have delivered evidence of the
termination of insurance and bonding coverage of GOLF Corporation and CUBS
Construction and the indemnity agreement referenced in ss.5(j)(ii);
(xvii) The Sellers shall have delivered to the Buyer a
certificate, duly executed by Jon S. Claypool, to the effect that no offers of
securities have been made to Mr. Claypool in the State of California; and
(xviii) The Sellers shall have executed and delivered to Buyer
any and all documents necessary to assign to the Company (or any beneficiary
designated by the Company) and to terminate all of Sellers' right, title and
interest in: (i) all insurance policies included in the Company's Most Recent
Financial Statements; and (ii) any additional insurance policies identified in
Exhibit 4(y)(A) to the Disclosure Schedule as owned by the Company. The Buyer
may waive any condition specified in this ss.7(a) if it executes a writing so
stating at or prior to the Closing.
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(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the cash portion of the Purchase Price shall be delivered
and paid by the Buyer to Sellers in accordance with ss.2(b) hereof;
(ii) immediately available funds in the aggregate amount of
Six Hundred and Thirty Five Thousand, Two Hundred and Ninety One and 99/100
Dollars ($635,291.99) (and in addition to the cash portion of the Purchase
Price) shall have been delivered by Buyer to the Company and the Company shall
have, in turn, delivered such aggregate amount to those employees of the Company
entitled to receipt thereof under the Retention Bonus Agreements as the first
installment of their respective retention bonus, allocable among them in
accordance with the Retention Bonus Agreements;
(iii) each of the Convertible Promissory Notes shall have been
duly executed and delivered by the Buyer to the Sellers and shall be in full
force and effect;
(iv) each of the Retention Bonus Agreements shall have been
duly executed by each of the Company and the Buyer and delivered by the Company
and the Buyer to the appropriate employees thereunder, and each of the same
shall be in full force and effect;
(v) the representations and warranties set forth in ss.3(b)
above shall be true and correct in all material respects at and as of the
Closing Date;
(vi) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(vii) no action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(viii) the Buyer shall have delivered to the Sellers a
certificate, duly executed by Buyer's President, to the effect that each of the
conditions specified above in ss.7(b)(v)-(vii) is satisfied in all respects;
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(ix) the Company shall have entered into: an Employment
Agreement with John L. Manta in the form of Exhibit E-1 attached hereto; an
Employment Agreement with Michael J. Chakos in the form of Exhibit E-2 attached
hereto; and Employment Agreement with Leo J. Manta in the form of Exhibit E-3
attached hereto; an Employment Agreement with Allan DeLange in the form of
Exhibit E-4 attached hereto; an Employment Agreement with Ted Choucalas in the
form of Exhibit E-6 attached hereto, an Employment Agreement with Mike Choucalas
in the form of Exhibit E-7 attached hereto and a Consulting Agreement with
Steven A. Manta in the form of Exhibit L attached hereto, together with a
severance Letter Agreement from the Company to Steven A. Manta in which the
Company agrees (A) for a period of twelve (12) months from the Closing Date: (i)
to continue, at the Company's expense, the medical and disability benefits
provided to him by the Company as of the date hereof and (ii) to provide him, at
the Company's expense, with an automobile or similar benefit substantially
equivalent to the automobile provided to him by the Company as of the date
hereof and (B) to allow Steven A. Manta, to the extent permissible under any of
the then applicable medical and disability plans maintained by the Company, to
continue to participate in such plans, provided that if Steven A. Manta is no
longer engaged by the Company as a consultant, he shall reimburse the Company on
a monthly basis for all premiums for such benefits.
(x) the Buyer shall have duly executed and issued each of the
Stock Option Agreements in form and substance as set forth in Exhibit C attached
hereto, to the employees of the Company as specified in ss.6(k) hereof, and the
same shall be in full force and effect;
(xi) the Buyer shall have entered into a Registration Rights
Agreement with each of the Sellers in form and substance as set forth in Exhibit
G attached hereto, and the same shall be in full force and effect;
(xii) the Sellers shall have received from counsel to the
Buyer an opinion in form and substance as set forth in Exhibit I attached
hereto, addressed to the Sellers, and dated as of the Closing Date, subject to
such changes as may be reasonably made by the legal opinion committee of counsel
to Buyer, which changes shall be reasonably acceptable to counsel to Sellers;
and
(xiii) the Sellers shall have received a Guaranty of American
Eco Corporation of the payment obligations of Buyer under the Retention Bonus
Agreements and the Convertible Promissory Notes, in the form of Exhibit J
attached hereto (the "Guaranty") and the same shall be in full force and effect;
and
(xiv) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to be provided by the Buyer
in order to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Requisite Sellers.
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The Requisite Sellers may waive any condition specified in this ss.7(b) if they
execute a writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations, Warranties and Covenants. All of the
representations, warranties and covenants of the Parties contained in this
Agreement shall survive the Closing hereunder.
(b) Indemnification by Sellers -- Joint and Several Liability.
(i) Joint and Several Liability -- General. Each of the
Sellers jointly and severally agree to indemnify the Buyer from and against the
entirety of any Adverse Consequences the Buyer may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any of the following
matters (excluding those matters set forth in ss.8(c)):
(A) a breach by any of the Sellers of any of their representations,
warranties, and covenants contained herein or in any of the other Sellers'
Transaction Documents; or
(B) in the event the Company has any Liability for any amount pursuant to
the agreements required to be terminated in accordance with ss.5(i) hereof.
(ii) Limitations on Joint and Several Liability.
Notwithstanding the foregoing, the right of Buyer to joint and several
indemnification under ss.8(b)(i) shall be subject to the following provisions:
(A) the maximum amount of indemnification payments required to be paid by
Sellers under ss.8(b)(i) or any other right or remedy provided in ss.8(i)
(except for claims pursuant to ss.8(c)), in the aggregate, shall be Four
Hundred and Twenty Five Thousand Dollars ($425,000); provided, however, any
amounts paid by the Sellers pursuant to ss.8(c) shall not be credited to
the maximum indemnification amount set forth above; and
(B) no indemnification shall be payable pursuant to
ss.8(b)(i) with respect to
claims asserted after November 10, 2000; and
(C) all indemnification payments shall be subject to the limitations on
indemnification set forth in ss.8(h) hereof; and
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(D) no indemnification payment shall be due hereunder in respect of any of
the matters disclosed in the Existing Reports and the amount of any Adverse
Consequences resulting therefrom shall not be counted pursuant to
ss.8(h)(i) hereof; provided, however, that nothing contained in this ss.8
shall have any affect on any Liability of any of the Sellers pursuant to
the Assignment Agreement regarding the lease of the warehouse located at
141 141st Street, Hammond, Indiana.
(c) Indemnification by Sellers -- Several Liability.
(i) Several Liability -- General. Each of the Sellers,
severally, but not jointly, agrees to indemnify the Buyer from and against the
entirety of any Adverse Consequences the Buyer may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any of the following
matters (excluding those matters set forth in ss.8(b)):
(A) any breach of any of the Sellers' representations, warranties or
covenants contained herein with respect to Taxes, including the
representations and warranties contained in ss.4(k) hereof; or
(B) in the event the Company has any Liability as a result of the
commission, at any time prior to Closing, of a criminal offense. For
purposes of this ss.8, a "criminal offense" shall mean a violation by the
Sellers, the Company, or any of its employees, servants, agents, officers
or directors of any statute, regulation, rule, judgment, order, decree,
ruling or charge of any government, governmental authority or court which
could or does impose criminal penalties, liabilities or sanctions.
(ii) Several Liability -- Limitations. Notwithstanding the
foregoing, the right of Buyer to several indemnification under ss.8(c)(i) shall
be subject to the following provisions:
(A) no Seller shall have any liability for indemnification pursuant to
ss.8(c)(i) in excess of the sum of: (1) that portion of the Purchase Price
that is received by the Seller (in cash or by delivery of a Convertible
Promissory Note); and (2) the amount payable under the Seller's Retention
Bonus Agreement;
(B) no indemnification shall be payable pursuant to ss.8(c)(i) with respect
to claims asserted after the expiration of the statute of limitations
applicable in civil tax matters to the assessment of Taxes against the
Company for all periods ending on or before the Closing Date;
(C) no indemnification shall be due or payable
pursuant to ss.8(c)(i)(B) with
respect to claims asserted more than 120 days after the Buyer receives actual
notice of the conviction or the entering of any plea; provided, however, that
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for purposes hereof, a claim shall be deemed "asserted" upon the Buyer giving
written notice to the Sellers (or their representatives) that the Buyer seeks
indemnification as a result of such claim.
(D) all payments shall be subject to the limitations
on indemnification set forth
in ss.8(h) hereof.
(d) Indemnification by Buyers. In the event the Buyer breaches (or in
the event any third party alleges facts that, if true, would mean the Buyer has
breached) any of its representations, warranties, and covenants contained
herein, or in any other of Buyer's Transaction Documents to which it is a party,
and provided that any of the Sellers makes a written claim for indemnification
against the Buyer pursuant to ss.11(h) below, then the Buyer agrees to indemnify
each of the Sellers from and against the entirety of any Adverse Consequences
the Seller may suffer resulting from, arising out of, relating to, in the nature
of, or caused by the breach (or the alleged breach).
(e) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this ss.8, then the Indemnified Party shall promptly
notify each Indemnifying Party thereof in writing; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) either (A) the Indemnifying Party thereby is
prejudiced, or (B) the notice is otherwise given after the dates or time periods
specified in ss.8(b)(ii)(B), ss.8(c)(ii)(B), or ss.8(c)(ii)(C) above, as
applicable.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will in accordance with and subject to the terms of this
ss.8, indemnify the Indemnified Party from and against the entirety of any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim, (B)
the Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (C) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief, and (D)
the Indemnifying Party conducts the defense of the Third Party Claim actively
and diligently.
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(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with ss.8(e)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (B) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party, and (C) the Indemnifying Party may consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party provided the
Indemnifying Party pays any and all monetary obligations relating to such
judgment or settlement, unless: (i) such judgment or settlement imposes any
non-monetary obligation upon the Indemnified Party, or (ii) such judgment or
settlement is, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice adverse to the continuing business
interests of the Indemnified Party.
(iv) In the event any of the conditions in ss.8(e)(ii) above
is or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent from,
any Indemnifying Party in connection therewith), (B) the Indemnifying Parties
will reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (C) the Indemnifying Parties will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this ss.8.
(f) Determination of Adverse Consequences. The Parties shall take into
account the time cost of money (using the Applicable Rate as the discount rate)
in determining Adverse Consequences for purposes of this ss.8. All
indemnification payments under this ss.8 shall be deemed adjustments to the
Purchase Price.
(g) Recoupment. Before seeking any cash indemnification payments
otherwise due from Sellers to Buyer hereunder, Buyer shall recoup or setoff all
or any part of any Adverse Consequences for which it is entitled to receive
indemnification from Sellers under this ss.8 by notifying each Seller from which
it is entitled to receive indemnification that the Buyer is either reducing the
principal amount outstanding under his or its Convertible Promissory Note or the
amount owed pursuant to his or its Retention Bonus Agreement. In the event
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reduction is made to the Convertible Promissory Note, such reduction shall be
made among all Sellers from which Buyer is entitled to indemnification for the
subject Adverse Consequences on a pro-rata basis in accordance with the relative
principal amounts outstanding under each of the Sellers' Convertible Promissory
Notes and shall affect the timing and amount of payments required under each of
the Convertible Promissory Notes in the same manner as if the Buyer had made a
permitted prepayment (without premium or penalty) thereunder. In the event
reduction is made to the Retention Bonus Agreements, such reduction shall be
made among all Sellers from which Buyer is entitled to indemnification for the
subject Adverse Consequences on a pro-rata basis in accordance with the relative
principal amounts outstanding under all of the Sellers' Retention Bonus
Agreements.
Notwithstanding the foregoing, any recoupment by Buyer of any
Adverse Consequences shall be subject to the following provisions:
(i) Consent of the Parties. In the event of any dispute between the
parties with respect to Buyer's right of recoupment, the parties shall first use
their best efforts to resolve any such claim on terms and conditions acceptable
to the parties. If the parties are unable to resolve the dispute within ten (10)
calendar days after the commencement of efforts to resolve the dispute, the
dispute will be submitted to arbitration in accordance with ss.8(g)(ii) hereof.
(ii) Arbitration.
(a) Any party may submit any matter referred to in ss.8(g)(i)
hereof to arbitration by notifying the other parties hereto, in writing, of such
dispute. Within ten (10) days after receipt of such notice, the Buyer, on the
one hand, and the Requisite Sellers, on the other hand, shall designate in
writing one arbitrator to resolve the dispute; provided, that if the parties
hereto cannot agree on an arbitrator within such ten-day (10) period, the
arbitrator shall be selected pursuant to the rules of the American Arbitration
Association (the "AAA"). The arbitrator so designated shall be a neutral and
impartial party and shall be selected in accordance with the AAA's Commercial
Arbitration Rules then in effect, except that each party shall be entitled to
strike on a preemptory basis, for any reason or no reason, any and all of the
names of potential arbitrators on the list submitted to the parties by the AAA
as being qualified. In the event the parties cannot agree on a mutually
acceptable arbitrator from the one or more lists submitted by the AAA, the
President of the AAA shall designate the arbitrator, which designee may include
persons named on any list submitted by the AAA.
(b) Within fifteen (15) days after the designation of the
arbitrator, the arbitrator and the parties shall meet, at which time the Buyer
and the Requisite Sellers shall be required to set forth in writing all disputed
issues and a proposed ruling on each such issue.
(c) The arbitrator shall set a date for a hearing, which shall
be no later than thirty (30) days after the submission of written proposals
pursuant to paragraph (b) above, to discuss each of the issues identified by the
parties. The arbitration shall be governed by the rules of the AAA; provided,
that the arbitrator shall have sole discretion with regard to the admissibility
of evidence.
(d) The arbitrator shall use his best efforts to rule on each
disputed issue within thirty (30) days after the completion of the hearings
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described in paragraph (c) above. The determination of the arbitrator as to the
resolution of any dispute shall be binding and conclusive upon all parties
hereto. All rulings of the arbitrator shall be in writing and shall be delivered
to the parties hereto.
(e) The prevailing party or parties in any arbitration shall
be entitled to an award of reasonable attorneys' fees incurred in connection
with the arbitration. The non-prevailing party or parties shall pay such fees,
together with the fees of the arbitrator and the costs and expenses of the
arbitration.
(f) Any arbitration pursuant to this ss.8(g) shall be
conducted in Chicago, Illinois. Any arbitration award may be entered in and
enforced by any court having jurisdiction therefor and the parties hereby
consent and commit themselves to the jurisdiction of the courts of the State of
Illinois and the United States District Court for the Northern District of
Illinois for purposes of the enforcement of any arbitration award.
(g) All questions as to the meaning of the above clauses shall
be resolved by the arbitrator, and his decision thereon shall be absolutely
binding, and not subject to judicial review.
(iii) any recoupment of Convertible Promissory Notes pursuant to this
Section shall be made to the Sellers on a pro-rata basis, based upon the
outstanding balance on all Convertible Promissory Notes.
(iv) during the pendency of any arbitration hereunder, Buyer may deduct
from any payments that otherwise become due and payable to a Seller under
his or its Convertible Promissory Note or Retention Bonus Agreement the
amount that the Buyer seeks to recoup from such Seller under the pending
arbitration, and the failure to pay such amounts (but only such amounts)
shall not constitute a default thereunder. In the event that the arbitrator
determines that Buyer either was not entitled to recoupment at all or for
the full amount claimed, Buyer shall pay to Sellers any amounts deducted
from any payments otherwise due under the Convertible Promissory Notes or
the Retention Bonus Agreement within ten (10) days after such determination
and shall pay to Sellers the interest on such deducted amount at the
Applicable Rate.
(h) Limitations on Indemnification. An Indemnifying Party's indemnification
obligations hereunder shall be subject to the following further
limitations.
(i) Deductible on Claims. Notwithstanding anything herein to the contrary,
no Party shall be entitled to receive any indemnification payments in
accordance with this ss.8 unless and until such Party is entitled to
$25,000 with respect to a single claim or $50,000 with respect to the
aggregate amount of all claims of such Party, whereupon such Party shall
only receive indemnification payments in excess of such amount.
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(ii) Amounts Received from Third Parties. Any indemnification payment
otherwise due hereunder from the Sellers shall be reduced by the amount of
any payments received by the Buyer from any third party (including, without
limitation, amounts received under any insurance policies) in respect of
the Adverse Consequences for which such indemnification payment is due;
provided, however, that the Buyer shall not be required to seek
indemnification from such third party prior to enforcing its rights to
indemnification pursuant to this ss.8. Buyer acknowledges and agrees that
in the event that Buyer recovers any amount from any third party
(including, without limitation, amounts received under any insurance
policies) in respect of any Adverse Consequences for which Buyer has
previously recovered any indemnification payment from Sellers, Buyer shall
promptly remit to each Seller an amount equal to such Seller's pro-rata
portion of such third party recovery in accordance with each Seller's
respective percentage of ownership of the Shares. In no event shall such
remittance be deemed a prepayment of any amounts due and owing to any of
the Sellers under the Convertible Promissory Notes or the Retention Bonus
Agreements; provided, however, that such remittance may be applied to
credit the Buyer for the principal payments or amounts that Buyer owed to
Sellers pursuant to the Convertible Promissory Notes or the Retention Bonus
Agreement which have not been paid by Buyer pursuant to Buyer's exercise of
its right of recoupment set forth in ss.8(g). Sellers shall have a right of
subrogation with respect to any insurance coverages afforded the Company
with respect to any Adverse Consequences for which the Buyer receives
indemnification or other reimbursement from Sellers under this ss.8 or
otherwise.
(i) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of representation,
warranty, or covenant; provided, however, that the limitations on
indemnification set forth in this ss.8, including, without limitation, the
deductible on claims referenced in ss.8(h), the maximum amount of
indemnification referenced herein, and the time limitations referenced in
ss.8(b)(ii)(B), ss.8(c)(ii)(B) and ss.8(c)(ii)(C), shall apply to all such
statutory, equitable and common law remedies. Each of the Sellers hereby agrees
that he or it will not make any claim for indemnification against the Company by
reason of the fact that he or it was a director, officer, employee, or agent of
any such entity or was serving at the request of any such entity as a partner,
trustee, director, officer, employee, or agent of another entity (whether such
claim is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses, or otherwise and whether such claim is pursuant to
any statute, articles of incorporation, bylaw, agreement, or otherwise) with
respect to any action, suit, proceeding, complaint, claim, or demand brought by
the Buyer against such Seller (whether such action, suit, proceeding, complaint,
claim, or demand is pursuant to this Agreement, applicable law, or otherwise).
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9. Tax Matters. The following provisions shall govern the allocation of
responsibility as between Buyer and Sellers for certain tax matters following
the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date. Buyer shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company for all periods ending on or prior to the Closing Date for which
the filing date is after the Closing Date. Buyer shall permit the Requisite
Sellers to review and comment on each such Tax Return described in the preceding
sentence prior to filing.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of the Company for Tax periods which begin before the Closing Date
and end after the Closing Date
(c) Cooperation on Tax Matters.
(i) Buyer, the Company and Sellers shall cooperate fully, as
and to the extent reasonably requested by the other Party, in connection with
the filing of Tax Returns pursuant to this Section and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other Party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making the employees, if any, of such Party available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. The Company and Sellers agree (A) to retain all
books and records with respect to Tax matters pertinent to the Company relating
to any taxable period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by Buyer or Sellers, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (B) to
give the other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests,
the Company or Sellers, as the case may be, shall allow the other party to take
possession of such books and records.
(ii) Buyer and Sellers further agree, upon request, to use
their reasonable best efforts to obtain any certificate or other document from
any governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax in respect of any period or portion thereof ending
on or before the Closing Date that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(iii) Buyer and Sellers further agree, upon request, to
provide the other party with all information that either party may be required
to report pursuant to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
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(d) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Company shall be terminated as of
the Closing Date and, after the Closing Date, the Company shall not be bound
thereby or have any liability thereunder.
(e) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with the sale of the Shares pursuant to the
terms of this Agreement shall be paid by Sellers when due, and Sellers will, at
their own expense, file all necessary Tax Returns and other documentation with
respect to all such transfer, documentary, sales, use, stamp, registration and
other Taxes and fees, and, if required by applicable law, Buyer will, and will
cause its affiliates to, join in the execution of any such Tax Returns and other
documentation.
10. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Requisite Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Sellers' Notice Recipient at any time prior to the Closing (A) in
the event any of the Sellers has breached any material representation, warranty,
or covenant contained in this Agreement in any material respect, the Buyer has
notified the Sellers' Notice Recipient of the breach in writing, and the breach
has continued without cure for a period of ten (10) calendar days after the
notice of breach or (B) if the Closing shall not have occurred on or before
November 10, 1997, by reason of the failure of any condition precedent under
ss.7(a) hereof (unless the failure results primarily from the Buyer itself
breaching any representation, warranty, or covenant contained in this
Agreement); and
(iii) the Requisite Sellers may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (A) in the
event the Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, any of the Sellers has
notified the Buyer of the breach in writing, and the breach has continued
without cure for a period of ten (10) days after the notice of breach or (B) if
the Closing shall not have occurred on or before November 10, 1997, by reason of
the failure of any condition precedent under ss.7(b) hereof (unless the failure
results primarily from any of the Sellers themselves breaching any
representation, warranty, or covenant contained in this Agreement).
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(b) Effect of Termination. If any Party terminates this Agreement
pursuant to ss.10(a) above, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party (except
for any Liability of any Party then in breach).
(c) Failure to Deliver Mark F. Manta Waiver. The failure of the Sellers
to deliver the Mark F. Manta Waiver shall not constitute a breach of the
Agreement, provided the Sellers have used their reasonable best efforts to
secure and deliver the Mark F. Manta Waiver.
11. Miscellaneous.
(a) Nature of Certain Obligations.
(i) The covenants of each of the Sellers in ss.2(a) above
concerning the sale of his or its Shares to the Buyer are several obligations.
This means that the particular Seller making the representation, warranty, or
covenant will be solely responsible to the extent provided in ss.8 above for any
Adverse Consequences the Buyer may suffer as a result of any breach thereof.
(ii) The remainder of the representations, warranties, and
covenants in this Agreement are joint and several obligations. This means that
each Seller will be responsible to the extent provided in ss.8 above for the
entirety of any Adverse Consequences the Buyer may suffer as a result of any
breach thereof.
(b) Press Releases and Public Announcements. The Sellers shall not
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of the Buyer.
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Requisite Sellers.
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(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the Notice Recipient, with copies
to such Party's counsel, as set forth below:
If to the Sellers: Michael J. Chakos Copy to: Timothy R. Donovan, Esq.
J.L. Manta, Inc. Jenner & Block
5233 Hohman Avenue One IBM Plaza
Hammond, IN 46320 Chicago, IL 60611
Fax: 219-933-1075 Fax: 312-527-0484
If to the Buyer: Frank J. Fradella Copy to: Aaron A. Gilman, Esq.
President & CEO Devine, Millimet & Branch,
EIF Holdings, Inc. Professional Association
616 FM 1960 West 12 Essex Street
Suite 630 P.O. Box 39
Houston, TX 77090 Andover, MA 01810
Fax: 281-537-9668 Fax: 978-470-0618
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address and/or the Notice Recipient to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Illinois without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Illinois or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Illinois.
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<PAGE>
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Sellers. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties and the Company will bear his or its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. The
Sellers agree that the Company has not borne or will bear any of the Sellers'
costs and expenses (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
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Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which they may be
entitled, at law or in equity.
(p) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Illinois in any action or
proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and determined in any
such court. Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other Party with respect
thereto. Any Party may make service on any other Party by sending or delivering
a copy of the process (i) to the Party to be served at the address and in the
manner provided for the giving of notices in ss.11(h) above. Nothing in this
ss.11(p), however, shall affect the right of any Party to bring any action or
proceeding arising out of or relating to this Agreement in any other court or to
serve legal process in any other manner permitted by law or at equity. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
*****
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
BUYER: EIF HOLDINGS, INC.
By:/s/ Frank J. Fradella
----------------------------
Frank J. Fradella, President
SELLERS:
/s/ Leo J. Manta /s/ Steven A. Manta
- ------------------------------- -------------------------------
Leo J. Manta Steven A. Manta
/s/ Michael J. Chakos /s/ John L. Manta
- ------------------------------- -------------------------------
Michael J. Chakos John L. Manta
/s/ Allan DeLange /s/ John L. Manta
- ------------------------------- -------------------------------
Allan DeLange John L. Manta, as Trustee of
Zachary Manta Trust
/s/ Leo G. Manta /s/John L. Manta
- ------------------------------- -------------------------------
Leo G. Manta John L. Manta, as Trustee of
Alexander Manta Trust
/s/ Jon S. Claypool /s/ John L. Manta
- ------------------------------- -------------------------------
Jon S. Claypool John L. Manta, as Trustee of
Erica Manta Trust
g:\common\corp\agreemnt\stockpur\stockpur.eif
62
Page 68
- 10 -
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES WHICH MAY BE
ACQUIRED UPON THE EXERCISE OF THIS CONVERTIBLE PROMISSORY NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED (WHETHER OR NOT
FOR CONSIDERATION) BY THE HOLDER WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN OPINION SATISFACTORY TO THE MAKER OF COUNSEL SATISFACTORY TO
THE MAKER TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE
ACT.
Amount: $6,500,000.00 Date: November 18, 1997
Interest:5.25%
Term: Eighteen (18) Months
CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED, EIF Holdings, Inc., a Hawaii corporation (the
"Maker"), promises to pay to Deere Park Capital Management Inc., an Illinois
corporation, as nominee for EIFH Joint Venture, L.L.C. and Reg D Hedge Funds
(the "Beneficiaries"), with an address at 650 Dundee Road, Suite 460,
Northbrook, Illinois 60062 or order (the "Holder"), the sum of Six Million Five
Hundred Thousand ($6,500,000.00) Dollars on or before May 18, 1999, together
with interest on the unpaid balance at the rate of five and one-quarter percent
(5.25%) per annum. Interest shall be calculated on the basis of actual days
elapsed and a 360-day year. All payments received by the Holder are to be
applied first to interest accrued to the date of payment and thereafter toward
payment of principal. Said principal sum, together with all interest accrued to
the date of payment, shall be due and payable at the Holder's address given
above, or at such other address as the Holder may from time to time designate by
written notice to the Maker. Interest after any uncured Event of Default
hereunder shall accrue at the rate of twelve percent (12%) per annum.
Interest under this Convertible Promissory Note (the "Note") shall be
due and payable quarterly in arrears, with the first payment due on March 1,
1998, and then on each June 1, September 1, December 1 and March 1, until paid
in full.
In addition to the stated interest provided for herein, Maker promises
to pay to the Holder an amount equal to ten percent (10%) of the principal
amount hereof, or the sum of Six Hundred Fifty Thousand Dollars ($650,000.00),
if Holder has not exercised any of its conversion rights hereunder and the Note
is paid in full any time after eighteen (18) months from the date of this Note.
The Maker shall have the right to prepay the balance due in whole or in
part without premium or penalty.
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This Note shall, at the option of the Holder, become due and payable
fifteen (15) days after written notice from the Holder of any of the following
events of default ("Event of Default") which remains uncured after the
expiration of such fifteen (15) day period:
(a) The failure of Maker to pay any sum hereunder when due;
(b) Absence of approval by shareholders of Maker (the
"Shareholder Approval") by April 15, 1998 for authorization and
issuance of Preferred Conversion and Common Conversion Stock (as
hereinafter defined) for the conversions described and provided for
hereunder;
(c) Failure by Maker to file a Registration Statement (Form
S-1 or S-3) with the U.S. Securities and Exchange Commission by within
sixty (60) days after the date of the Shareholder Approval with respect
to the Common Conversion Stock of Maker to be issued as a result of the
Note being convertible into Preferred Conversion Stock of the Maker,
and in turn, such Preferred Conversion Stock being convertible into
such Common Conversion Stock of the Maker, all as described and
provided for hereunder;
(d) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to
insolvency or relief of debtors (a "Bankruptcy Law"), the Maker shall
(1) commence a voluntary case or proceeding; (2) consent to the entry
of an order for relief against it in an involuntary case; (3) consent
to the appointment of a trustee, receiver, assignee, liquidator or
similar official; (4) make an assignment for the benefit of its
creditors; or (5) admit in writing its inability to pay its debts as
they become due; and
(e) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (1) is for relief against Maker in
an involuntary case; (2) appoints a trustee, receiver, assignee,
liquidator or similar official for the Maker or any substantial part of
any of Maker's properties; or (3) orders the liquidation of the Maker
and the order or decree is not dismissed within one hundred and eighty
(180) days.
Conversion of Note into Preferred Stock.
(a) Conversion Procedures.
(i) The Holder shall have the right to convert any part or all
of the principal amount due hereunder which is unpaid and outstanding
into a number of shares of a series of preferred stock which may be
issued by the Maker, having such terms, rights and benefits, subject to
the terms of conversion into common stock of the Maker as provided
below, as may be approved by the shareholders of the Maker (the
"Preferred Conversion Stock"), with such number to be determined by
dividing the principal amount designated by the Holder in the Preferred
Conversion Notice (as defined hereinbelow) by the Preferred Conversion
Price (as defined hereinbelow). The Holder shall exercise its
conversion rights hereunder by delivering to the Maker an executed
conversion notice (the "Preferred Conversion Notice") in the form of
Schedule A attached hereto. Principal payments may not be converted, in
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whole or in part, into increments of less than One Thousand (1,000)
shares of Preferred Conversion Stock.
(ii) Each such conversion of this Note shall be deemed to have
been affected as of the close of business on the date the Preferred
Conversion Notice has been given by the Maker. At such time that such
conversion has been affected, the Holder shall be deemed to have become
the holder of record of the shares of Preferred Conversion Stock
represented hereby.
(iii) As soon as possible after conversion has been affected
(but in any event within five (5) business days after conversion has
been affected), the Maker shall deliver to the converting Holder a
certificate or certificates representing the number of shares of
Preferred Conversion Stock issuable by reason of such conversion in the
name of the Holder.
(iv) The issuance of certificates of shares of Preferred
Conversion Stock upon conversion of this Note shall be made without
charge to the Holder.
(b) Preferred Conversion Price.
(i) The initial conversion price shall be One Dollar ($ 1.00)
per share (the "Preferred Conversion Price"). In the event of the
occurrence of any of the following events on or after the original date
of issuance of this Note (A) the Maker shall subdivide its outstanding
shares of preferred stock (the "Preferred Stock") into a greater number
of shares of Preferred Conversion Stock (including, without limitation,
by way of a forward stock split), (B) the Maker shall combine its
outstanding shares of Preferred Conversion Stock into a smaller number
of shares of Preferred Conversion Stock (including, without limitation,
by way of a reverse stock split) or (C) any other recapitalization or
any merger, consolidation, combination or other extraordinary corporate
event with respect to the Maker, the Preferred Conversion Price in
effect immediately prior thereto and Holder's conversion rights
hereunder shall be adjusted retroactively as provided below so that if
thereafter Holder shall exercise his conversion rights with respect to
any future principal payment, the Holder shall be entitled to receive
the number and kind of shares of the Preferred Conversion Stock of
Maker as it would have owned or have been entitled to receive after the
happening of any of the events described in (A) or (B) above, had it
exercised its conversion right immediately prior to the happening of
such event. Any adjustment made to the Preferred Conversion Price
pursuant to this Section shall become effective immediately after the
effective date of the subdivision or combination of shares of Preferred
Conversion Stock. Such adjustments shall be made successively whenever
any event listed above shall occur. All calculations under this Section
shall be made to the nearest cent.
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Conversion of Preferred Conversion Stock into Common Stock
(a) Conversion Procedures.
(i) The Holder of Preferred Conversion Stock shall have the
right to convert any or all shares of the Preferred Conversion Stock,
obtained by conversion of all or a portion of the principal amount of
the Note as hereinabove provided, into a number of shares of common
stock which may be issued by the Maker, having such terms, rights and
benefits as may be approved by the shareholders of the Maker (the
"Common Conversion Stock"), with such number to be determined on a
share-for-share basis (one (1) share of Preferred Conversion Stock for
each share of Common Conversion Stock) as designated by the Holder of
Preferred Conversion Stock in the Common Conversion Notice (as defined
hereinbelow), plus any additional shares of the common stock of the
Maker as provided hereunder as a penalty for late or non-registration
of the Common Conversion Stock with the U.S. Securities and Exchange
Commission ("Registration Penalties"). The Holder shall exercise its
conversion rights hereunder by delivering to the Maker an executed
conversion notice (the "Common Conversion Notice") in the form of
Schedule B attached hereto.
(ii) Each such conversion of Preferred Conversion Stock shall
be deemed to have been affected as of the close of business on the date
the Common Conversion Notice has been received by the Maker. At such
time that such conversion has been affected, the holder of the
Preferred Conversion Stock shall be deemed to have become the holder of
record of the shares of Common Conversion Stock represented hereby.
(iii) As soon as possible after conversion has been affected
(but in any event within five (5) business days after conversion has
been affected), the Maker shall deliver to the converting holder of
Preferred Conversion Stock a certificate or certificates representing
the number of shares of Common Conversion Stock issuable by reason of
such conversion in the name of the holder.
(iv) The issuance of certificates of shares of Common
Conversion Stock upon conversion of Preferred Conversion Stock shall be
made without charge to the holder.
(b) Adjustments to Share-for-Share Conversion Basis.
(i) In the event of the occurrence of any of the following
events on or after the original date of issuance of the Preferred
Conversion Stock (A) the Maker shall subdivide its outstanding shares
of common stock into a greater number of shares of common stock
(including, without limitation, by way of a forward stock split), (B)
the Maker shall combine its outstanding shares of common stock into a
smaller number of shares of common stock (including, without
limitation, by way of a reverse stock split) or (C) any other
recapitalization or any merger, consolidation, combination or other
extraordinary corporate event with respect to the Maker, the
share-for-share conversion basis in effect immediately prior thereto
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<PAGE>
and Preferred Conversion Stock conversion rights hereunder shall be
adjusted retroactively as provided below so that if thereafter the
holder of any Preferred Conversion Stock shall exercise his conversion
rights with respect thereto, the holder shall be entitled to receive
the number and kind of shares of the Conversion Common Stock of Maker
as it would have owned or have been entitled to receive after the
happening of any of the events described in (A) or (B) above, had it
exercised its conversion right immediately prior to the happening of
such event. Any adjustment made to the share-for-share conversion basis
pursuant to this Section shall become effective immediately after the
effective date of the subdivision or combination of shares of common
stock. Such adjustments shall be made successively whenever any event
listed above shall occur. All calculations under this Section shall he
made to the nearest cent.
Notwithstanding anything herein contained herein to the contrary, a
Holder of this Note or Preferred Conversion Stock shall not be entitled to
exercise any of the conversion rights set forth in this Note unless the issuance
of the Preferred Conversion Stock and/or Common Conversion Stock is approved by
the shareholders of the Maker and all necessary approvals required for the Maker
to amend its corporate charter to authorize a series of convertible preferred
stock and such additional shares of common stock of the Maker as may be required
for the maximum conversion of such authorized convertible preferred stock
(including those required under applicable federal and state securities laws and
exchange or NASDAQ rules and regulations) have been granted and such amendment
duly filed. Subject to the terms and conditions of this Note, all of the terms,
rights and benefits of the Preferred Conversion Stock and Common Conversion
Stock shall be as determined by the stockholders of the Maker.
Further notwithstanding anything herein contained to the contrary
hereunder, if this Note is converted into Preferred Conversion Stock, or the
Note is first converted into Preferred Conversion Stock, and in turn, the latter
is converted into Common Conversion Stock pursuant to the terms hereof, and the
resulting stock is disposed of in a public or a private transaction, or both, at
any time after eighteen (18) months from the date of this Note and the amount of
the proceeds received therefrom is less than the sum of (a) the unpaid principal
amount of this Note, (b) accrued but unpaid interest thereon, (c) the amount of
Six Hundred Fifty Thousand Dollars ($650,000.00) referred to in the third
paragraph of this Note, and (d) an additional amount equal to Six Hundred Fifty
Thousand Dollars ($650,000.00), then the Maker shall be obligated hereunder for
any deficiency represented by the difference between the sum of the items set
forth in (a) through (d) above and the actual dollar amount of proceeds received
on account of such public and/or private disposition and any and all other
proceeds or payments received by Holder from any source or collateral relating
to, or received in connection with, this transaction.
In the event that the Preferred Conversion Stock is converted hereunder
into Conversion Common Stock, the Maker shall be obligated to register with the
U.S. Securities Exchange Commission all of the shares of the resulting
Conversion Common Stock. If a Registration Statement on Forms S-1 or S-3 is not
filed by Maker within sixty (60) days, after Shareholder Approval, or if such
Registration Statement is so filed but fails to become effective by September
15, 1998, then the following penalties shall apply: three percent (3%) on the
amount of Six Million Five Hundred Thousand Dollars ($6,500,000.00) for the
first month and two percent (2%) for each month after either or both of the
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applicable said dates for timely filing and effectiveness. Said penalties may be
paid by the Maker in additional shares of the Common Conversion Stock, employing
the average closing price for common stock of the Maker on the NASDAQ for the
five (5) trading days preceding the issuance of such penalty shares.
No delay or omission on the part of the Holder in exercising any right
hereunder shall operate as a waiver of such right or any other right. Waiver on
any one occasion shall not be construed as a bar to or a waiver of any right or
remedy on any future occasion.
The indebtedness and all of the obligations evidenced by this Note are
secured by a Pledge Agreement by and among the Maker, the Holder, and a
custodian dated of even date herewith, with respect to collateral consisting of
(i) all of the shares of stock of J.L. Manta, Inc., an Illinois corporation,
being acquired with the majority of the proceeds of the loan evidenced by this
Note, and (ii) one million (1,000,000) shares of common stock of the Maker.
The Maker represents, warranties and covenants to Holder that:
i. The statements contained in this Note are true and correct.
ii. The execution, delivery, and performance by the
undersigned of this Note are within the Maker's corporate powers, have
been duly authorized by all necessary corporate action, and do not (a)
contravene the Maker's charter or bylaws or (b) violate any law, rule,
regulation, order, writ, judgment, decree or award.
iii. This Note, when duly executed and delivered; will
constitute a legal, valid and binding obligation of the Maker,
enforceable against the Maker in accordance with its terms.
The Holder of this Note, for itself and each of the Beneficiaries, by
its acceptance hereof, hereby understands and agrees, with respect to the
Preferred Conversion Stock and the Common Conversion Stock (all such securities,
including this Note and the Preferred Conversion Stock and the Common Conversion
Stock, are hereinafter referred to as the "Securities" for purposes of this
Note), that the Securities have not been registered under the Securities Act of
1933, as amended (the "Act"), and may not be sold, pledged, hypothecated,
donated, or otherwise transferred (whether or not for consideration) without an
effective registration statement under the Act or an opinion satisfactory to the
Maker of counsel satisfactory to the Maker and/or submission to the Maker of
such other evidence as may be satisfactory to counsel to the Maker, in each such
case, to the effect that any such transfer shall not be in violation of the Act.
It shall be a condition to the transfer of this Note that any transferee thereof
deliver to the Maker its written agreement to accept and be bound by all of the
terms and conditions of this Note.
The stock certificates of the Maker that will evidence the shares of
Preferred Conversion Stock and Common Conversion Stock with respect to which
this Note may be converted will be imprinted with a conspicuous legend in
substantially the following form:
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"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED (WHETHER OR NOT
FOR CONSIDERATION) BY THE HOLDER WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN OPINION SATISFACTORY TO THE MAKER OF
COUNSEL SATISFACTORY TO THE MAKER TO THE EFFECT THAT ANY SUCH TRANSFER
SHALL NOT BE IN VIOLATION OF THE ACT."
This Note has been issued in reliance upon the Holder's representations
to the Maker, which the Holder hereby confirms, that the Securities are acquired
for investment for their own account and not with a view to the sale or
distribution of any part thereof, and that each of the Holder and the
Beneficiaries has no present intention of selling, granting participation in, or
otherwise distributing the same. Each of the Holder and the Beneficiaries
further represents that each does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer, or grant participations to
such person or to any third person with respect to any of the Securities.
The Holder understands that the Securities are not registered under the
Act, on the ground that the issuance of the Securities should be exempt from
registration under the Act, and that maker's reliance on such exemption is
predicated on Holder's representations set forth herein.
The Holder represents that the Holder and each of the Beneficiaries,
and each and every participant, shareholder, investor, or member of each of the
foregoing, is an "accredited investor" within the meaning of Rule 501 under the
Act and that each is experienced in evaluating and investing in companies such
as the Maker, each has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its investment
and each has the ability to bear the economic risks of the investment made by
each respective entity. The Holder, for itself and each of the Beneficiaries,
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further represents that each has had access, prior to the issuance of this Note,
to the information filed by Maker with the Securities and Exchange Commission
and that each has had, during the course of the transaction, the opportunity to
ask questions of, and receive answers from, the Maker concerning the terms and
conditions of the issuance of the Securities and to obtain additional
information necessary to verify the accuracy of any information furnished to it
to which it had access.
The Holder, for itself and each of the Beneficiaries, acknowledges that
each of the Holder and the Beneficiaries understands that the Securities may not
be sold, transferred, or otherwise disposed of without registration under the
Act or an exemption therefrom, and that in the absence of an effective
Registration Statement covering the Securities or an available exemption from
registration under the Act, the Securities must be held indefinitely. In
particular, the Holder acknowledges for itself and each of the Beneficiaries,
that each is aware that the Securities may not be sold pursuant to Rule 144
promulgated under the Act unless all of the conditions of that Rule are met. The
Holder represents, for itself and each of the Beneficiaries, that, in the
absence of an effective Registration Statement covering the Securities each of
the Holder and the Beneficiaries will sell, transfer or otherwise dispose of the
Securities only in a manner consistent with its representation set forth herein.
This Note shall be governed by and construed in accordance with the
laws of the State of Illinois (without giving effect to its conflict of laws
principles).
The Maker irrevocably submits to the jurisdiction of any federal or
Illinois State court having jurisdiction in Chicago, Illinois, for the purpose
of any suit, or action or proceeding arising out of or relating to this Note,
and irrevocably waives, to the fullest extent permitted by law, any right to a
jury demand which it may have, any objection which it may have to the laying of
the venue of any such suit, action or proceeding brought in such court and any
claim that any suit, action or proceeding brought in such court has been brought
in an inconvenient forum. Nothing in this paragraph shall affect the right of
the Holder to bring any action of proceeding against the undersigned or its
property in the courts of other jurisdictions otherwise having jurisdiction over
the Maker.
IN WITNESS WHEREOF, the Maker has executed and delivered this Note as
of the date first stated above.
EIF HOLDINGS, INC.
By: _________________________
Frank Fradella, President
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SCHEDULE A
PREFERRED CONVERSION NOTICE
To: EIF Holdings, Inc.
The undersigned payee of the within Note hereby irrevocably exercises
the option to convert the principal payment in the amount of _____________
Dollars ($______) that is due to the undersigned pursuant to the within Note
into the number of shares of Preferred Conversion Stock determined by dividing
the above designated principal amount of the Preferred Conversion Price in
accordance with the terms of the within Note, and directs that the shares
issuable and deliverable upon the conversion, together with any check in payment
for fractional shares, be issued in the name of and delivered to the undersigned
payee.
Date: _____________________
---------------------------------
Holder
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SCHEDULE B
COMMON CONVERSION NOTICE
To: EIF Holdings, Inc.
The undersigned Holder of the within Preferred Conversion Stock hereby
irrevocably exercises the option to convert shares thereof into the same number
of shares of Conversion Common Stock in accordance with the terms of the within
Note, plus any additional shares of Conversion Common Stock as may be due and
owing for any penalty incurred for late or nonregistration as provided in the
terms of the within Note, and directs that the shares issuable and deliverable
upon the conversion be issued in the name of and delivered to the undersigned
payee.
Date: _____________________
---------------------------------
Holder
g:\common\corp\notes\eifh.doc
Page 78
Amount: $2,500,000.00 Date: November 18,1997
Interest:9% per annum
Term: 90 days
PROMISSORY NOTE
FOR VALUE RECEIVED, EIF Holdings, Inc., a Hawaii corporation (the
"Maker") promises to pay to Deere Park Capital Management, Inc. with an address
at 650 Dundee Road, Suite 460, Northbrook, Illinois 60062, or order (the
"Holder"), the sum of Two Million, Five Hundred Thousand ($2,500,000.00)
Dollars, on or before February 16, 1998, with interest at the rate of nine
percent (9%) per annum. Interest shall be calculated on the basis of actual days
elapsed and a 360-day year. All payments received by the Holder are to be
applied first to interest accrued to the date of payment and thereafter toward
payment of principal. Said principal sum, together with all interest accrued to
the date of payment, shall be due and payable at the Holder's address given
above, or at such other address as the Holder may from time to time designate by
written notice to the Maker. Interest after any uncured Event of Default
hereunder shall accrue at the rate of twelve percent (12%) per annum.
Interest under this Note shall be due and payable in full upon maturity
of the Note.
The Maker shall have the right to prepay the balance due in whole or in
part without premium or penalty.
This Note shall, at the option of the Holder, become due and payable
fifteen (15) days after written notice from the Holder of any of the following
events of default which remains uncured after the end of such fifteen (15) day
period:
(a) The failure of Maker to pay any sum hereunder when due;
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), the Maker shall (1) commence a voluntary
case or proceeding; (2) consent to the entry of an order for relief against it
in an involuntary case; (3) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar of official; (4) make an assignment for the
benefit of its creditors; or (5) admit in writing its inability to pay its debts
as they become due; and
(c) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (1) is for relief against Maker in an involuntary
case; (2) appoints a trustee, receiver, assignee, liquidator or similar official
for the Maker or any substantial part of any of Maker's properties; or (3)
orders the liquidation of the Maker and the order or decree is not dismissed
within one hundred and eighty (180) days.
No delay or omission on the part of the Holder in exercising any right
hereunder shall operate as a waiver of such right or any other right. Waiver on
any one occasion shall not be construed as a bar to or a waiver of any right or
remedy on any future occasion.
The indebtedness evidenced by this Note is secured by (a) a Pledge
Agreement of even date herewith, executed by the Maker, the Payee and a
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custodian, dated of even date herewith with respect to collateral consisting of
four hundred seventy-five thousand (475,000) shares of common stock of American
Eco Corporation, a corporation of Ontario, Canada, and (b) a Security Agreement
of even date herewith executed by the Maker's affiliate, J.L. Manta, Inc., an
Illinois corporation, in favor of the Holder with respect to a subordinate
security interest in certain property of said affiliate.
The Maker represents, warranties and covenants to Holder that:
i. The statements contained in this Note are true and correct.
ii. The execution, delivery, and performance by the
undersigned of this Note are within the Maker's corporate powers, have
been duly authorized by all necessary corporate action, and do not (a)
contravene the Maker's charter or bylaws or (b) violate any law, rule,
regulation, order, writ, judgment, decree, or award.
iii. This Note, when duly executed and delivered, will
constitute a legal, valid and binding obligation of the Maker,
enforceable against the Maker in accordance with its terms.
This Note shall be governed by and construed in accordance with the
laws of the State of Illinois (without giving effect to its conflict of laws
principles).
The undersigned irrevocably submits to the jurisdiction of any federal
or Illinois State court having jurisdiction in Chicago, Illinois, for the
purpose of any suit, or action or proceeding arising out of or relating to this
Note, and irrevocably waives, to the fullest extent permitted by law, any right
to a jury demand which it may have, any objection which it may have to the
laying of the venue of any such suit, action or proceeding brought in such court
and any claim that any suit, action or proceeding brought in such court has been
brought in an inconvenient forum. Nothing in this paragraph shall affect the
right of the Lender to bring any action of proceeding against the undersigned or
its property in the courts of other jurisdictions otherwise having jurisdiction
over the undersigned.
IN WITNESS WHEREOF, the Maker has executed and delivered this Note as
of the date first stated above.
EIF HOLDINGS, INC.
By: ____________________________
Frank J. Fradella, President
g:\common\corp\notes\deere.doc
Page 80
CONVERTIBLE PROMISSORY NOTE
The Securities evidenced hereby have not been registered under the Securities
Act of 1933, as amended, and cannot be sold unless they are registered under
said Act. EIF Holdings, Inc. has issued stop transfer instructions with respect
thereto in order to effectuate the foregoing restrictions.
No: A-1
$783,760.39 November 18, 1997
FOR VALUE RECEIVED, EIF Holdings, Inc., a Hawaii corporation (the
"Maker"), promises to pay to the order of Leo J. Manta, an individual residing
at 14535 Lakeridge Road, Orland Park, Illinois 60462 (the "Payee"), in lawful
money of the United States of America, the principal sum of Seven Hundred and
Eighty Three Thousand, Seven Hundred and Sixty and 39/100 Dollars ($783,760.39),
without interest, in the manner provided below.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of a certain Stock Purchase Agreement, dated
September 30, 1997, by and between, inter alia, the Maker, as "Buyer," and the
Payee, as one of the "Sellers," (the "Stock Purchase Agreement"), whereby the
Maker has agreed to purchase all of the issued and outstanding capital stock of
J.L. Manta, Inc., an Illinois corporation ("Manta"). Contemporaneously with the
execution and delivery of this Note to Payee, Maker is also executing and
delivering a Convertible Promissory Note (in the same form and substance as this
Note, other than the principal amount) to each of the other "Sellers" under the
Stock Purchase Agreement (collectively, the "Other Notes"). This Note and the
Other Notes are being executed by Maker and delivered to Payee and the other
"Sellers" as partial payment of the purchase price to Sellers for the Shares
under the Stock Purchase Agreement. Contemporaneously with the execution and
delivery of this Note to Payee, Maker is also delivering a guaranty of this Note
(the "Guaranty") by American Eco Corporation (the "Guarantor"). This Agreement
is subject to the terms and conditions of the Stock Purchase Agreement, which
are, by this reference, incorporated herein and made a part hereof. Capitalized
terms used in this Note without definition shall have the respective meanings
set forth in the Stock Purchase Agreement.
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1. Payments
(a) Principal Payments. Subject to the other provisions of this Section
1 and the provisions of Section 2 below, the principal amount of this Note shall
be due and payable in accordance with the following payment schedule until all
amounts hereunder have been paid in full:
November 18, 1998 $261,253.44
February 18, 1999 $65,313.36
May 18, 1999 $65,313.37
August 18, 1999 $65,313.37
November 18, 1999 $65,313.37
February 18, 2000 $65,313.37
May 18, 2000 $65,313.37
August 18, 2000 $65,313.37
November 18, 2000 $65,313.37
All payments of principal on this Note shall be made to the Payee at
his address set forth above or at such other place in the United States of
America as the Payee shall designate to the Maker in writing. If any payment of
principal on this Note is due on a day which is not a business day, such payment
shall be due on the next succeeding business day. "Business day" means any day
other than a Saturday, Sunday or legal holiday in the State of Illinois.
(b) Optional Prepayments. The Maker may, without premium or penalty, at
any time and from time to time, prepay all or any portion of the outstanding
principal balance due under this Note. Any partial prepayments shall be applied
to installments of principal in inverse order of their maturity.
(c) Right of Recoupment. The Maker shall, in accordance with Section
8(g) of the Stock Purchase Agreement have the option of recouping all or any
part of any Adverse Consequences it may suffer, to the extent Maker is entitled
to indemnity therefor under Section 8 of the Stock Purchase Agreement, by
notifying the Payee that the Maker is reducing the principal amount outstanding
under this Note. Any such recoupment by Maker shall be made subject to and in
accordance with all of the terms and conditions set forth in Section 8(g) of the
Stock Purchase Agreement and any payments required to be made by the Maker under
Section 8(g) of the Stock Purchase Agreement shall be deemed to be a payment
obligation under this Note. Such reduction shall affect the timing and amount of
payments required under this Note in the same manner as if the Maker had made a
permitted prepayment (without premium or penalty) hereunder.
(d) Interest on Late Payments. Interest on any payment of principal
required hereunder which is not made on the due date for such payment shall
accrue at the Applicable Rate (as defined in the Stock Purchase Agreement) from
the due date for such payment until the date on which such payment is made. Any
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interest due hereunder shall be paid at the same time as the principal payment
is made.
2. Defaults
(a) Events of Default. The occurrence of any one or more of the
following events with respect to the Maker shall constitute an event of default
hereunder ("Event of Default"):
(i) If the Maker shall fail to pay when due the full amount of
any payment of principal or interest on this Note or any of the Other Notes and
such failure continues for five (5) days after the Payee notifies the Maker
thereof in writing; provided, however, that the exercise by the Maker in good
faith (and in accordance with the terms and conditions of Section 8 of the Stock
Purchase Agreement) of its right to withhold payment (or portion thereof) during
the pendency of any arbitration proceeding pursuant to the provisions of Section
8(g) of the Stock Purchase Agreement, whether or not ultimately recoupment is
determined to be justified, shall not constitute an Event of Default.
(ii) The occurrence of an Event of Default under any of the
Other Notes.
(iii) If, pursuant to or within the meaning of the United
States Bankruptcy Code or any other federal or state law relating to insolvency
or relief of debtors (a "Bankruptcy Law"), any of the Maker, Guarantor or Manta
shall (1) commence a voluntary case or proceeding; (2) consent to the entry of
an order for relief against it in an involuntary case; (3) consent to the
appointment of a trustee, receiver, assignee, liquidator or similar official;
(4) make an assignment for the benefit of its creditors; or (5) admit in writing
its inability to pay its debts as they become due.
(iv) The occurrence of a default pursuant to Section 2 of the
Retention Bonus Agreement (as defined in the Stock Purchase Agreement) entered
into between the Maker, Manta and the Payee.
(v) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (1) is for relief against any of the Maker,
Guarantor or Manta in an involuntary case, (2) appoints a trustee, receiver,
assignee, liquidator or similar official for any of the Maker, Guarantor or
Manta or any substantial part of any of the Maker's properties, Guarantor's
properties, or Manta's properties, or (3) orders the liquidation of any of the
Maker, Guarantor or Manta; and in each case the order or decree is not dismissed
within ninety (90) days.
(b) Remedies. Upon the occurrence of an Event of Default hereunder
(unless all Events of Default have been cured by the Maker or waived by the
Payee or the holders of the Other Notes), the holders of Notes representing more
than fifty (50%) percent of the then outstanding principal balance under this
Note and all of the Other Notes (the "Requisite Holders") may, at their option,
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(i) declare the entire unpaid principal balance of this Note and the Other Notes
immediately due and payable regardless of any prior forbearance, (ii) exercise
any and all rights and remedies available to them under applicable law,
including, without limitation, the right to collect from the Maker all sums due
under this Note and the Other Notes, and, (iii) exercise any and all other
rights and remedies available to them at law or in equity. Notwithstanding the
foregoing, upon the occurrence of an Event of Default in connection with a
bankruptcy pursuant to Section 2(a)(iii) or Section 2(a)(v) above, the unpaid
principal amount of, and any and all accrued and unpaid interest on the Note and
any and all accrued and unpaid fees hereunder shall automatically become
immediately due and payable, without presentation, demand, or protest or other
requirements of any kind, all of which are hereby expressly waived by Maker. The
Maker shall pay all reasonable costs and expenses incurred by or on behalf of
the Payee and the holders of the Other Notes in connection with their exercise
of any or all of their rights and remedies under this Note and the Other Notes,
including, without limitation, reasonable attorney's fees. Notwithstanding the
foregoing, the Payee, acting alone, and without the consent or approval of the
Requisite Holders, may, upon the occurrence of an Event of Default as provided
for in Section 2(a)(i) (specifically excluding any Event of Default which shall
result from an Event of Default under any of the Other Notes), exercise and
pursue the foregoing remedies with respect to this Note.
3. Conversion.
(a) Conversion Procedures.
(i) The Payee is entitled, in lieu of receiving any principal
amount due hereunder (whether pursuant to an optional prepayment or by reason of
the occurrence of an Event of Default), to convert all or any portion of the
amount of any such principal payment into a number of shares of the no par value
common stock of Maker (the "Conversion Stock") determined by dividing the
principal amount designated by the Payee to be converted in the Conversion
Notice (as defined hereinbelow) by the Conversion Price (as defined
hereinbelow). The Payee shall exercise its conversion rights hereunder by
delivering to the Maker an executed conversion notice (the "Conversion Notice")
in the form of Schedule A attached hereto not less than thirty (30) days prior
to the scheduled due date of the principal payment to which it relates, or in
the case of any prepayment of principal by Maker or the acceleration of
principal payments upon an Event of Default, at any time prior to the acceptance
by Payee of such principal payment, but in such case, in no event later than ten
(10) days after the date upon which Payee received notice of such event.
(ii) Each such conversion of this Note shall be deemed to have
been affected as of the close of business on the scheduled due date for (or, in
the case of an optional prepayment or of acceleration of principal payments upon
an Event of Default, acceptance of) the principal payment in respect of which
such conversion is being made. At such time that such conversion has been
affected, the Payee shall be deemed to have become the holder of record of the
shares of Conversion Stock represented hereby.
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(iii) Notwithstanding any other provision hereof other than
Section 3(c) below, if a conversion of any portion of this Note is to be made in
connection with a public offering, the conversion of any portion of this Note
may, at the election of Payee, be conditioned upon the consummation of the
public offering in which case such conversion shall not be deemed to be
effective until the consummation of the public offering; provided, however, that
any failure of Maker to make a principal payment as required herein due to such
conditional exercise of the Payee's conversion rights shall in no event be
deemed to constitute an Event of Default nor shall Payee be entitled to any
interest or penalties upon said principal payment or to exercise any of Payee's
rights and remedies hereunder until and unless the Maker has failed to pay the
amount of such principal payment within twenty (20) days after written notice
from the Payee withdrawing the exercise of such conversion rights.
(iv) As soon as possible after conversion has been affected
(but in any event within five (5) business days after conversion has been
affected), the Maker shall deliver to the converting Payee a certificate or
certificates representing the number of shares of Conversion Stock issuable by
reason of such conversion in the name of the Payee.
(v) The issuance of certificates of shares of Conversion Stock
upon conversion of this Note shall be made without charge to the Payee. Upon
conversion of this Note, the Maker shall take all such actions as necessary in
order to ensure that the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid, and non-assessable.
(vi) The Maker shall not close its books against the transfer
of Conversion Stock issued or issuable upon conversion of this Note in any
manner which interferes with the timely conversion of this Note. The Maker shall
assist and cooperate with the Payee with respect to any requirement to make any
governmental filings or obtain any governmental approval prior to or in
connection with the conversion of this Note (including, without limitation,
making any filings required to be made by the Maker).
(vii) All shares of Conversion Stock which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens, and charges. The Maker shall take all such actions
as may be reasonably necessary to assure that all such shares of Conversion
Stock may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
shares of Conversion Stock may be listed (except for official notice of issuance
which shall be immediately delivered by the Company upon each such issuance).
(viii) Principal Payments may not be converted in whole or in
part into increments of less than One Thousand (1000) shares of no par value
Common Stock of the Maker in each instance.
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(b) Conversion Price.
(i) The initial conversion price (the "Conversion Price")
shall be the closing transaction price of Maker's common stock on the date the
Conversion Notice has been received by Maker, with such closing price as
reported on the OTC bulletin board by Bloomberg Business Services. In the event
of the occurrence of any of the following events on or after the original date
of issuance of this Note (A) the Maker shall subdivide its outstanding shares of
no par value Common Stock (the "Common Stock") into a greater number of shares
of Common Stock (including, without limitation, by way of a forward stock
split), (B) the Maker shall combine its outstanding shares of Common Stock into
a smaller number of shares of Common Stock (including, without limitation, by
way of a reverse stock split) or (C) any other recapitalization or any merger,
consolidation, combination or other extraordinary corporate event with respect
to the Maker, the Conversion Price in effect immediately prior thereto and
Payee's Conversion rights hereunder shall be adjusted retroactively as provided
below so that if thereafter Payee shall exercise his conversion rights with
respect to any future principal payment, the Payee shall be entitled to receive
the number and kind of shares of the capital stock of Maker as he would have
owned or have been entitled to receive after the happening of any of the events
described in (A) or (B) above, had he exercised his conversion right immediately
prior to the happening of such event. Any adjustment made to the Conversion
Price pursuant to this Section shall become effective immediately after the
effective date of the subdivision or combination of shares of Common Stock. Such
adjustments shall be made successively whenever any event listed above shall
occur. All calculations under this Section shall be made to the nearest cent.
(ii) Whenever the Conversion Price is adjusted, as herein
provided, the Maker shall promptly cause its independent auditors to provide the
Payee with a certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment (the "Adjustment Certificate").
(c) Additional Limitations on Conversion. Notwithstanding any provision
contained herein to the contrary, Employee shall not be entitled to exercise any
of the conversion rights set forth in this Section 3 prior to the earlier of:
(i) the date the Amendment (as defined in the Stock Purchase Agreement) is
approved by the Maker's stockholders; or (ii) June 30, 1998, and Maker shall not
have any obligations hereunder in respect of any exercise by Employee of any
conversion rights in contravention of this Section 3(c) nor shall Maker be
obligated to provide any of the Alternative Compensation Agreements (as defined
in the Stock Purchase Agreement) with respect thereto; provided that the
foregoing shall not prohibit Payee from exercising such conversion rights with
respect to any outstanding payments which remain due and owing as of the date
set forth above.
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4. Subordination.
(a) "Senior Debt" of Maker as the date of any determination thereof
shall mean (i) all principal, interest and other amounts payable by the Buyer to
Deere Park Capital Management, Inc. (or its affiliates) or any other entity
providing financing to the Maker on or prior to the Closing Date (as defined in
the Stock Purchase Agreement) solely in connection with the Stock Purchase
Agreement and the other Buyer's Transaction Documents (as defined in the Stock
Purchase Agreement) (the "Acquisition Debt") and any modification, extension,
renewal or refinancing of the outstanding principal amount of the Acquisition
Debt, and (ii) if applicable, all principal, interest and other amounts payable
by Manta to Harris Bank under the existing credit facility from Harris Bank to
Manta for the purpose of providing working capital to Manta (the "Harris Debt")
and any modification, extension, renewal or refinancing of the outstanding
principal amount of the Harris Debt to the extent that Maker or Manta assumes or
refinances any of the Harris Debt, and any credit facility secured by Maker or
Manta to replace the Harris Debt.
(b) This note is subordinate and junior in right of payment and
performance, to the extent and the manner set forth herein, to the Senior Debt.
The Senior Debt shall continue to be Senior Debt and entitled to the benefits of
these subordination provisions irrespective of any amendment, modification or
waiver of any term of the Senior Debt (including, but not limited to,
modifications of interest rates and payment terms) in each case in accordance
with the limitations set forth in the definition of Senior Debt. If the Senior
Lender (as hereinafter defined) gives Maker and Payee a written notice ("Default
Notice") which (i) states that one or more events of default (as hereinafter
defined) has occurred and is continuing and (ii) instructs Maker to cease making
payments and Payee to cease accepting and receiving payments, of amounts due
under this Note, then, subject to clause (d) below, unless and until such event
of default shall have been cured or waived or shall have ceased to exist, Maker
will not make and Payee will not ask for, demand, sue for, take or receive from
Maker any direct or indirect payment (in cash, property or otherwise) on account
of the principal of, or premium, if any, or interest on this Note, during any
period after written notice of such default shall be given to Maker by a holder
of any Senior Debt. In the event of: (i) any insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or other
similar proceeding relating to Maker, or to its property, (ii) any proceedings
for liquidation, dissolution or other winding up of Maker, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by Maker for the benefit of creditors, or (iv) any other
marshaling of the assets of Maker, all Senior Debt (including any interest
thereon accruing after the commencement of any such proceedings and any
additional interest that would have accrued thereon but for the commencement of
such proceedings) shall first be paid in full before any payment or
distribution, whether in cash or other property, shall be made to Payee on
account of this Note. Notwithstanding any provision contained in this Note so
long as Senior Lender has not sent Maker and Payee a Default Notice, Maker shall
pay Payee and Payee may receive, accept and apply, the payments provided for
herein on this Note as and when the same become due, whether by acceleration or
otherwise. For purposes of this Section 4, the term "event of default" shall
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mean any event of default, as defined in the loan documents, note, guaranty or
any other agreement, instrument or document under which the Senior Debt is now
or hereafter outstanding (each hereinafter referred to as "Senior Loan
Document," which term shall include any modifications, amendments, extensions,
renewals or replacements thereof in accordance with the limitations set forth in
the definition of Senior Debt) such that the holders thereof may accelerate the
maturity thereof. The term "Senior Lender" shall mean and include the obligee or
other holder of any of the obligations included in the meaning of "Senior Debt,"
including, but not limited to, Deere Park Capital Management, Inc. (or its
affiliates) and its successors and assigns. If any payment or distribution,
whether in cash, securities or other property, shall be received by Payee in
contravention of any of the terms hereof before all the Senior Debt shall have
been paid in full, and a Default Notice shall have preceded such payment or
distribution, such payment or distribution shall be received in trust for the
benefit of, and shall be paid over and delivered and transferred to the holders
of the Senior Debt for application to the payment of all Senior Debt remaining
unpaid, to the extent necessary to pay all such Senior Debt in full, and
thereupon, such payment shall not be deemed to have been received by Payee as a
payment or payments under this Note. In the event of the failure of Payee to
endorse or assign any such payment or distribution, the holder of the Senior
Debt is hereby irrevocably authorized to endorse or assign the same. No present
or future holder of the Senior Debt shall be prejudiced in the right to enforce
subordination of this Note by any act or failure to act on the part of Maker.
(c) The foregoing provisions as to subordination are solely for the
purpose of defining the relative rights of the holders of the Senior Debt, on
the one hand, and Payee, on the other hand. Nothing contained herein shall
impair, as between Maker and Payee, the obligation of Maker, which is
unconditional and absolute, to pay to Payee the principal hereof and any
interest thereon, as and when the same shall become due and payable in
accordance with the terms hereof, or prevent Payee from exercising all rights,
powers and remedies otherwise permitted by applicable law or hereunder upon a
default hereunder, all subject to the rights of the holders of the Senior Debt
to receive cash or other property otherwise payable or deliverable to Payee.
Payee shall take such action (including, without limitation, consent to the
filing of a financing statement with respect thereto) as may, in the opinion of
any holder of Senior Debt at the time outstanding, be necessary or appropriate
to assure the effectiveness of the subordination effected by these provisions.
(d) Notwithstanding anything herein to the contrary, Payee may
accelerate this Note and commence enforcement actions with respect thereto, or
otherwise receive and accept payments under this Note, if a Default Notice has
been given to Maker or Payee by Senior Lender and (1) within 180 days from the
date of such Default Notice, the event or events of default are not waived by
the Senior Lender, eliminated as a result of an amendment or modification of the
Senior Loan Documents or cured, or (2) the Senior Lender accelerates its Senior
Debt and commences enforcement actions with respect thereto or the collateral
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therefor. In the event that the Senior Lender has sent Maker and Payee a Default
Notice, Payee shall have no right (except as expressly provided herein) to
accelerate, enforce any claim with respect to this Note or otherwise take any
action against Maker or Maker's property without the prior written consent of
Senior Lenders, until such time as the Senior Debt has been paid in full and
Senior Lenders have no obligation to make further advances to Maker. Further,
notwithstanding anything hereunder the contrary, subject to the foregoing
restrictions upon acceleration, Payee may pursue any and all rights and remedies
which Payee may have against the Guarantor under the Guaranty, and nothing
herein shall in any manner be deemed to alter or effect Payee's rights or
remedies with respect to said Guarantor.
(e) Maker hereby covenants and agrees to send to Payee, immediately
upon receipt by Maker, any notice of acceleration or commencement of enforcement
actions received by Maker from the Senior Lender.
(f) Each Default Notice shall be deemed to have been given by Senior
Lender to Maker or Payee when delivered in person to such party at the party's
address listed in the Stock Purchase Agreement or when deposited in the United
States mail, first class postage pre-paid or, in the case of telegraphic notice
or overnight courier services, one business day after delivered to the
telegraphic company or overnight courier service with payment provided for, or
in the case of telex or telecopy notice, when sent, verification received, in
each case addressed to Maker or Payee at the respective addresses listed in the
Stock Purchase Agreement or at such other address as either party may designate
by notice to the other in accordance with this paragraph.
5. Miscellaneous.
(a) Amendments and Waivers. Except as otherwise expressly provided
herein, the provisions of this Note and the Other Notes may be amended and the
Maker may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Maker has obtained the written
consent of the holders of more than fifty (50%) percent of the outstanding
principal amount of this Note and the Other Notes; provided that no such action
shall change (i) the rate at which or the manner in which interest accrues on
this Note or the Other Notes or the times at which such interest becomes
payable, (ii) any provision relating to the scheduled payments or prepayments of
principal on this Note or the Other Notes, or (iii) except as provided in
Section 3(b) above, the Conversion Price of this Note or the Other Notes or the
number of shares or the class of stock into which the Notes are convertible,
without the written consent of the holders of at least seventy-five (75%)
percent of the outstanding principal amount of this Note and the Other Notes.
The rights and remedies of the Payee under this Note shall be cumulative and not
alternative. Neither the failure nor any delay in exercising any right, power or
privilege under this Note or any of the Other Notes will operate as a waiver of
such right, power or privilege and no single or partial exercise of any such
right, power or privilege by the Payee will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege. The Maker hereby waives presentment, demand, protest and
notice of dishonor and protest.
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(b) Notices. Any notice required or permitted to be given hereunder
shall be given in accordance with Section 11(h) of the Stock Purchase Agreement.
(c) Severability. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Note will remain in full force and effect. Any provision of this Note held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
(d) Governing Law and Jurisdiction. This Note shall be governed by and
in accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law, provision or rule (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois. Each of the Maker and
Payee submits to the jurisdiction of any state or federal court sitting in
Illinois and any action or proceeding arising out of or relating to this Note
and agrees that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
party with respect thereto. Any party may make service on any other party by
sending or delivering a copy of the process (1) to the party to be served at the
address and in the manner provided for the giving of notices in Section 5(b)
above. Nothing in this Section 5(d), however, shall affect the right of any
party to bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any other manner
permitted by law or in equity. Each party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or in equity.
(e) Parties in Interest. This Note shall bind the Maker and its
successors and assigns. This Note shall not be assigned or transferred by the
Payee without the express prior written consent of the Maker, except by will or,
in default thereof, by operation of law.
(f) Section Headings, Construction. The headings of Sections in this
Note are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Note unless otherwise specified.
(g) Gender. All words used in this Note will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the words "hereof" and "hereunder" and similar references refer to
this Note in its entirety and not to any specific section or subsection hereof.
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IN WITNESS WHEREOF, the Maker has executed and delivered this Note as
of the date first stated above.
THE MAKER:
EIF HOLDINGS, INC.
By: ___________________________
Frank J. Fradella, President
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Schedule A
CONVERSION NOTICE
To EIF Holdings, Inc.:
The undersigned payee of the within Note hereby irrevocably* exercises
the option to convert the principal payment in the amount of ______________
Dollars ($__________) that is due to the undersigned pursuant to the within Note
on ____________, ______ into the number of Conversion Stock determined by
dividing the above designated principal amount by the Conversion Price in
accordance with the terms of the within Note, and directs that the shares
issuable and deliverable upon the conversion, together with any check in payment
for fractional shares, be issued in the name of and delivered to the undersigned
payee.
Dated:__________________________
-----------------------------------
Leo J. Manta
* The word irrevocably may be deleted in any notice given for any
exercise of Payee's conversion rights in connection with a public offering as
described in Section 3(a)(iii) of the Note.
g:\common\corp\notes\manta.doc
Page 92
CONVERTIBLE PROMISSORY NOTE
The Securities evidenced hereby have not been registered under the Securities
Act of 1933, as amended, and cannot be sold unless they are registered under
said Act. EIF Holdings, Inc. has issued stop transfer instructions with respect
thereto in order to effectuate the foregoing restrictions.
No: A-2
$751,051.57 November 18, 1997
FOR VALUE RECEIVED, EIF Holdings, Inc., a Hawaii corporation (the
"Maker"), promises to pay to the order of Steven A. Manta, an individual
residing at 1918 North Cleveland Avenue, Unit C, Chicago, Illinois 60614 (the
"Payee"), in lawful money of the United States of America, the principal sum of
Seven Hundred and Fifty One Thousand and Fifty One and 57/100 Dollars
($751,051.57), without interest, in the manner provided below.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of a certain Stock Purchase Agreement, dated
September 30, 1997, by and between, inter alia, the Maker, as "Buyer," and the
Payee, as one of the "Sellers," (the "Stock Purchase Agreement"), whereby the
Maker has agreed to purchase all of the issued and outstanding capital stock of
J.L. Manta, Inc., an Illinois corporation ("Manta"). Contemporaneously with the
execution and delivery of this Note to Payee, Maker is also executing and
delivering a Convertible Promissory Note (in the same form and substance as this
Note, other than the principal amount) to each of the other "Sellers" under the
Stock Purchase Agreement (collectively, the "Other Notes"). This Note and the
Other Notes are being executed by Maker and delivered to Payee and the other
"Sellers" as partial payment of the purchase price to Sellers for the Shares
under the Stock Purchase Agreement. Contemporaneously with the execution and
delivery of this Note to Payee, Maker is also delivering a guaranty of this Note
(the "Guaranty") by American Eco Corporation (the "Guarantor"). This Agreement
is subject to the terms and conditions of the Stock Purchase Agreement, which
are, by this reference, incorporated herein and made a part hereof. Capitalized
terms used in this Note without definition shall have the respective meanings
set forth in the Stock Purchase Agreement.
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1. Payments
(a) Principal Payments. Subject to the other provisions of this Section
1 and the provisions of Section 2 below, the principal amount of this Note shall
be due and payable in accordance with the following payment schedule until all
amounts hereunder have been paid in full:
November 18, 1998 $250,350.52
February 18, 1999 $62,587.63
May 18, 1999 $62,587.63
August 18, 1999 $62,587.63
November 18, 1999 $62,587.63
February 18, 2000 $62,587.63
May 18, 2000 $62,587.63
August 18, 2000 $62,587.63
November 18, 2000 $62,587.64
All payments of principal on this Note shall be made to the Payee at
his address set forth above or at such other place in the United States of
America as the Payee shall designate to the Maker in writing. If any payment of
principal on this Note is due on a day which is not a business day, such payment
shall be due on the next succeeding business day. "Business day" means any day
other than a Saturday, Sunday or legal holiday in the State of Illinois.
(b) Optional Prepayments. The Maker may, without premium or penalty, at
any time and from time to time, prepay all or any portion of the outstanding
principal balance due under this Note. Any partial prepayments shall be applied
to installments of principal in inverse order of their maturity.
(c) Right of Recoupment. The Maker shall, in accordance with Section
8(g) of the Stock Purchase Agreement have the option of recouping all or any
part of any Adverse Consequences it may suffer, to the extent Maker is entitled
to indemnity therefor under Section 8 of the Stock Purchase Agreement, by
notifying the Payee that the Maker is reducing the principal amount outstanding
under this Note. Any such recoupment by Maker shall be made subject to and in
accordance with all of the terms and conditions set forth in Section 8(g) of the
Stock Purchase Agreement and any payments required to be made by the Maker under
Section 8(g) of the Stock Purchase Agreement shall be deemed to be a payment
obligation under this Note. Such reduction shall affect the timing and amount of
payments required under this Note in the same manner as if the Maker had made a
permitted prepayment (without premium or penalty) hereunder.
(d) Interest on Late Payments. Interest on any payment of principal
required hereunder which is not made on the due date for such payment shall
accrue at the Applicable Rate (as defined in the Stock Purchase Agreement) from
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the due date for such payment until the date on which such payment is made. Any
interest due hereunder shall be paid at the same time as the principal payment
is made.
2. Defaults
(a) Events of Default. The occurrence of any one or more of the
following events with respect to the Maker shall constitute an event of default
hereunder ("Event of Default"):
(i) If the Maker shall fail to pay when due the full amount of
any payment of principal or interest on this Note or any of the Other Notes and
such failure continues for five (5) days after the Payee notifies the Maker
thereof in writing; provided, however, that the exercise by the Maker in good
faith (and in accordance with the terms and conditions of Section 8 of the Stock
Purchase Agreement) of its right to withhold payment (or portion thereof) during
the pendency of any arbitration proceeding pursuant to the provisions of Section
8(g) of the Stock Purchase Agreement, whether or not ultimately recoupment is
determined to be justified, shall not constitute an Event of Default.
(ii) The occurrence of an Event of Default under any of the
Other Notes.
(iii) If, pursuant to or within the meaning of the United
States Bankruptcy Code or any other federal or state law relating to insolvency
or relief of debtors (a "Bankruptcy Law"), any of the Maker, Guarantor or Manta
shall (1) commence a voluntary case or proceeding; (2) consent to the entry of
an order for relief against it in an involuntary case; (3) consent to the
appointment of a trustee, receiver, assignee, liquidator or similar official;
(4) make an assignment for the benefit of its creditors; or (5) admit in writing
its inability to pay its debts as they become due.
(iv) The occurrence of a default pursuant to Section 2 of the
Retention Bonus Agreement (as defined in the Stock Purchase Agreement) entered
into between the Maker, Manta and the Payee.
(v) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (1) is for relief against any of the Maker,
Guarantor or Manta in an involuntary case, (2) appoints a trustee, receiver,
assignee, liquidator or similar official for any of the Maker, Guarantor or
Manta or any substantial part of any of the Maker's properties, Guarantor's
properties, or Manta's properties, or (3) orders the liquidation of any of the
Maker, Guarantor or Manta; and in each case the order or decree is not dismissed
within ninety (90) days.
(b) Remedies. Upon the occurrence of an Event of Default hereunder
(unless all Events of Default have been cured by the Maker or waived by the
Payee or the holders of the Other Notes), the holders of Notes representing more
than fifty (50%) percent of the then outstanding principal balance under this
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Note and all of the Other Notes (the "Requisite Holders") may, at their option,
(i) declare the entire unpaid principal balance of this Note and the Other Notes
immediately due and payable regardless of any prior forbearance, (ii) exercise
any and all rights and remedies available to them under applicable law,
including, without limitation, the right to collect from the Maker all sums due
under this Note and the Other Notes, and, (iii) exercise any and all other
rights and remedies available to them at law or in equity. Notwithstanding the
foregoing, upon the occurrence of an Event of Default in connection with a
bankruptcy pursuant to Section 2(a)(iii) or Section 2(a)(v) above, the unpaid
principal amount of, and any and all accrued and unpaid interest on the Note and
any and all accrued and unpaid fees hereunder shall automatically become
immediately due and payable, without presentation, demand, or protest or other
requirements of any kind, all of which are hereby expressly waived by Maker. The
Maker shall pay all reasonable costs and expenses incurred by or on behalf of
the Payee and the holders of the Other Notes in connection with their exercise
of any or all of their rights and remedies under this Note and the Other Notes,
including, without limitation, reasonable attorney's fees. Notwithstanding the
foregoing, the Payee, acting alone, and without the consent or approval of the
Requisite Holders, may, upon the occurrence of an Event of Default as provided
for in Section 2(a)(i) (specifically excluding any Event of Default which shall
result from an Event of Default under any of the Other Notes), exercise and
pursue the foregoing remedies with respect to this Note.
3. Conversion.
(a) Conversion Procedures.
(i) The Payee is entitled, in lieu of receiving any principal
amount due hereunder (whether pursuant to an optional prepayment or by reason of
the occurrence of an Event of Default), to convert all or any portion of the
amount of any such principal payment into a number of shares of the no par value
common stock of Maker (the "Conversion Stock") determined by dividing the
principal amount designated by the Payee to be converted in the Conversion
Notice (as defined hereinbelow) by the Conversion Price (as defined
hereinbelow). The Payee shall exercise its conversion rights hereunder by
delivering to the Maker an executed conversion notice (the "Conversion Notice")
in the form of Schedule A attached hereto not less than thirty (30) days prior
to the scheduled due date of the principal payment to which it relates, or in
the case of any prepayment of principal by Maker or the acceleration of
principal payments upon an Event of Default, at any time prior to the acceptance
by Payee of such principal payment, but in such case, in no event later than ten
(10) days after the date upon which Payee received notice of such event.
(ii) Each such conversion of this Note shall be deemed to have
been affected as of the close of business on the scheduled due date for (or, in
the case of an optional prepayment or of acceleration of principal payments upon
an Event of Default, acceptance of) the principal payment in respect of which
such conversion is being made. At such time that such conversion has been
affected, the Payee shall be deemed to have become the holder of record of the
shares of Conversion Stock represented hereby.
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(iii) Notwithstanding any other provision hereof other than
Section 3(c) below, if a conversion of any portion of this Note is to be made in
connection with a public offering, the conversion of any portion of this Note
may, at the election of Payee, be conditioned upon the consummation of the
public offering in which case such conversion shall not be deemed to be
effective until the consummation of the public offering; provided, however, that
any failure of Maker to make a principal payment as required herein due to such
conditional exercise of the Payee's conversion rights shall in no event be
deemed to constitute an Event of Default nor shall Payee be entitled to any
interest or penalties upon said principal payment or to exercise any of Payee's
rights and remedies hereunder until and unless the Maker has failed to pay the
amount of such principal payment within twenty (20) days after written notice
from the Payee withdrawing the exercise of such conversion rights.
(iv) As soon as possible after conversion has been affected
(but in any event within five (5) business days after conversion has been
affected), the Maker shall deliver to the converting Payee a certificate or
certificates representing the number of shares of Conversion Stock issuable by
reason of such conversion in the name of the Payee.
(v) The issuance of certificates of shares of Conversion Stock
upon conversion of this Note shall be made without charge to the Payee. Upon
conversion of this Note, the Maker shall take all such actions as necessary in
order to ensure that the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid, and non-assessable.
(vi) The Maker shall not close its books against the transfer
of Conversion Stock issued or issuable upon conversion of this Note in any
manner which interferes with the timely conversion of this Note. The Maker shall
assist and cooperate with the Payee with respect to any requirement to make any
governmental filings or obtain any governmental approval prior to or in
connection with the conversion of this Note (including, without limitation,
making any filings required to be made by the Maker).
(vii) All shares of Conversion Stock which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens, and charges. The Maker shall take all such actions
as may be reasonably necessary to assure that all such shares of Conversion
Stock may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
shares of Conversion Stock may be listed (except for official notice of issuance
which shall be immediately delivered by the Company upon each such issuance).
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(viii) Principal Payments may not be converted in whole or in
part into increments of less than One Thousand (1000) shares of no par value
Common Stock of the Maker in each instance.
(b) Conversion Price.
(i) The initial conversion price (the "Conversion Price")
shall be the closing transaction price of Maker's common stock on the date the
Conversion Notice has been received by Maker, with such closing price as
reported on the OTC bulletin board by Bloomberg Business Services. In the event
of the occurrence of any of the following events on or after the original date
of issuance of this Note (A) the Maker shall subdivide its outstanding shares of
no par value Common Stock (the "Common Stock") into a greater number of shares
of Common Stock (including, without limitation, by way of a forward stock
split), (B) the Maker shall combine its outstanding shares of Common Stock into
a smaller number of shares of Common Stock (including, without limitation, by
way of a reverse stock split) or (C) any other recapitalization or any merger,
consolidation, combination or other extraordinary corporate event with respect
to the Maker, the Conversion Price in effect immediately prior thereto and
Payee's Conversion rights hereunder shall be adjusted retroactively as provided
below so that if thereafter Payee shall exercise his conversion rights with
respect to any future principal payment, the Payee shall be entitled to receive
the number and kind of shares of the capital stock of Maker as he would have
owned or have been entitled to receive after the happening of any of the events
described in (A) or (B) above, had he exercised his conversion right immediately
prior to the happening of such event. Any adjustment made to the Conversion
Price pursuant to this Section shall become effective immediately after the
effective date of the subdivision or combination of shares of Common Stock. Such
adjustments shall be made successively whenever any event listed above shall
occur. All calculations under this Section shall be made to the nearest cent.
(ii) Whenever the Conversion Price is adjusted, as herein
provided, the Maker shall promptly cause its independent auditors to provide the
Payee with a certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment (the "Adjustment Certificate").
(c) Additional Limitations on Conversion. Notwithstanding any provision
contained herein to the contrary, Holder shall not be entitled to exercise any
of the conversion rights set forth in this Section 3 prior to the earlier of:
(i) the date the Amendment (as defined in the Stock Purchase Agreement) is
approved by the Maker's stockholders; or (ii) June 30, 1998, and Maker shall not
have any obligations hereunder in respect of any exercise by Employee of any
conversion rights in contravention of this Section 3(c) nor shall Maker be
obligated to provide any of the Alternative Compensation Agreements (as defined
in the Stock Purchase Agreement) with respect thereto; provided that the
foregoing shall not prohibit Payee from exercising such conversion rights with
respect to any outstanding payments which remain due and owing as of the date
set forth above.
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4. Subordination.
(a) "Senior Debt" of Maker as the date of any determination thereof
shall mean (i) all principal, interest and other amounts payable by the Buyer to
Deere Park Capital Management, Inc. (or its affiliates) or any other entity
providing financing to the Maker on or prior to the Closing Date (as defined in
the Stock Purchase Agreement) solely in connection with the Stock Purchase
Agreement and the other Buyer's Transaction Documents (as defined in the Stock
Purchase Agreement) (the "Acquisition Debt") and any modification, extension,
renewal or refinancing of the outstanding principal amount of the Acquisition
Debt, and (ii) if applicable, all principal, interest and other amounts payable
by Manta to Harris Bank under the existing credit facility from Harris Bank to
Manta for the purpose of providing working capital to Manta (the "Harris Debt")
and any modification, extension, renewal or refinancing of the outstanding
principal amount of the Harris Debt to the extent that Maker or Manta assumes or
refinances any of the Harris Debt, and any credit facility secured by Maker or
Manta to replace the Harris Debt.
(b) This note is subordinate and junior in right of payment and
performance, to the extent and the manner set forth herein, to the Senior Debt.
The Senior Debt shall continue to be Senior Debt and entitled to the benefits of
these subordination provisions irrespective of any amendment, modification or
waiver of any term of the Senior Debt (including, but not limited to,
modifications of interest rates and payment terms) in each case in accordance
with the limitations set forth in the definition of Senior Debt. If the Senior
Lender (as hereinafter defined) gives Maker and Payee a written notice ("Default
Notice") which (i) states that one or more events of default (as hereinafter
defined) has occurred and is continuing and (ii) instructs Maker to cease making
payments and Payee to cease accepting and receiving payments, of amounts due
under this Note, then, subject to clause (d) below, unless and until such event
of default shall have been cured or waived or shall have ceased to exist, Maker
will not make and Payee will not ask for, demand, sue for, take or receive from
Maker any direct or indirect payment (in cash, property or otherwise) on account
of the principal of, or premium, if any, or interest on this Note, during any
period after written notice of such default shall be given to Maker by a holder
of any Senior Debt. In the event of: (i) any insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or other
similar proceeding relating to Maker, or to its property, (ii) any proceedings
for liquidation, dissolution or other winding up of Maker, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by Maker for the benefit of creditors, or (iv) any other
marshaling of the assets of Maker, all Senior Debt (including any interest
thereon accruing after the commencement of any such proceedings and any
additional interest that would have accrued thereon but for the commencement of
such proceedings) shall first be paid in full before any payment or
distribution, whether in cash or other property, shall be made to Payee on
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account of this Note. Notwithstanding any provision contained in this Note so
long as Senior Lender has not sent Maker and Payee a Default Notice, Maker shall
pay Payee and Payee may receive, accept and apply, the payments provided for
herein on this Note as and when the same become due, whether by acceleration or
otherwise. For purposes of this Section 4, the term "event of default" shall
mean any event of default, as defined in the loan documents, note, guaranty or
any other agreement, instrument or document under which the Senior Debt is now
or hereafter outstanding (each hereinafter referred to as "Senior Loan
Document," which term shall include any modifications, amendments, extensions,
renewals or replacements thereof in accordance with the limitations set forth in
the definition of Senior Debt) such that the holders thereof may accelerate the
maturity thereof. The term "Senior Lender" shall mean and include the obligee or
other holder of any of the obligations included in the meaning of "Senior Debt,"
including, but not limited to, Deere Park Capital Management, Inc. (and its
affiliates) and its successors and assigns. If any payment or distribution,
whether in cash, securities or other property, shall be received by Payee in
contravention of any of the terms hereof before all the Senior Debt shall have
been paid in full, and a Default Notice shall have preceded such payment or
distribution, such payment or distribution shall be received in trust for the
benefit of, and shall be paid over and delivered and transferred to the holders
of the Senior Debt for application to the payment of all Senior Debt remaining
unpaid, to the extent necessary to pay all such Senior Debt in full, and
thereupon, such payment shall not be deemed to have been received by Payee as a
payment or payments under this Note. In the event of the failure of Payee to
endorse or assign any such payment or distribution, the holder of the Senior
Debt is hereby irrevocably authorized to endorse or assign the same. No present
or future holder of the Senior Debt shall be prejudiced in the right to enforce
subordination of this Note by any act or failure to act on the part of Maker.
(c) The foregoing provisions as to subordination are solely for the
purpose of defining the relative rights of the holders of the Senior Debt, on
the one hand, and Payee, on the other hand. Nothing contained herein shall
impair, as between Maker and Payee, the obligation of Maker, which is
unconditional and absolute, to pay to Payee the principal hereof and any
interest thereon, as and when the same shall become due and payable in
accordance with the terms hereof, or prevent Payee from exercising all rights,
powers and remedies otherwise permitted by applicable law or hereunder upon a
default hereunder, all subject to the rights of the holders of the Senior Debt
to receive cash or other property otherwise payable or deliverable to Payee.
Payee shall take such action (including, without limitation, consent to the
filing of a financing statement with respect thereto) as may, in the opinion of
any holder of Senior Debt at the time outstanding, be necessary or appropriate
to assure the effectiveness of the subordination effected by these provisions.
(d) Notwithstanding anything herein to the contrary, Payee may
accelerate this Note and commence enforcement actions with respect thereto, or
otherwise receive and accept payments under this Note, if a Default Notice has
been given to Maker or Payee by Senior Lender and (1) within 180 days from the
date of such Default Notice, the event or events of default are not waived by
the Senior Lender, eliminated as a result of an amendment or modification of the
Senior Loan Documents or cured, or (2) the Senior Lender accelerates its Senior
Debt and commences enforcement actions with respect thereto or the collateral
therefor. In the event that the Senior Lender has sent Maker and Payee a Default
Notice, Payee shall have no right (except as expressly provided herein) to
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accelerate, enforce any claim with respect to this Note or otherwise take any
action against Maker or Maker's property without the prior written consent of
Senior Lenders, until such time as the Senior Debt has been paid in full and
Senior Lenders have no obligation to make further advances to Maker. Further,
notwithstanding anything hereunder the contrary, subject to the foregoing
restrictions upon acceleration, Payee may pursue any and all rights and remedies
which Payee may have against the Guarantor under the Guaranty, and nothing
herein shall in any manner be deemed to alter or effect Payee's rights or
remedies with respect to said Guarantor.
(e) Maker hereby covenants and agrees to send to Payee, immediately
upon receipt by Maker, any notice of acceleration or commencement of enforcement
actions received by Maker from the Senior Lender.
(f) Each Default Notice shall be deemed to have been given by Senior
Lender to Maker or Payee when delivered in person to such party at the party's
address listed in the Stock Purchase Agreement or when deposited in the United
States mail, first class postage pre-paid or, in the case of telegraphic notice
or overnight courier services, one business day after delivered to the
telegraphic company or overnight courier service with payment provided for, or
in the case of telex or telecopy notice, when sent, verification received, in
each case addressed to Maker or Payee at the respective addresses listed in the
Stock Purchase Agreement or at such other address as either party may designate
by notice to the other in accordance with this paragraph.
5. Miscellaneous.
(a) Amendments and Waivers. Except as otherwise expressly provided
herein, the provisions of this Note and the Other Notes may be amended and the
Maker may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Maker has obtained the written
consent of the holders of more than fifty (50%) percent of the outstanding
principal amount of this Note and the Other Notes; provided that no such action
shall change (i) the rate at which or the manner in which interest accrues on
this Note or the Other Notes or the times at which such interest becomes
payable, (ii) any provision relating to the scheduled payments or prepayments of
principal on this Note or the Other Notes, or (iii) except as provided in
Section 3(b) above, the Conversion Price of this Note or the Other Notes or the
number of shares or the class of stock into which the Notes are convertible,
without the written consent of the holders of at least seventy-five (75%)
percent of the outstanding principal amount of this Note and the Other Notes.
The rights and remedies of the Payee under this Note shall be cumulative and not
alternative. Neither the failure nor any delay in exercising any right, power or
privilege under this Note or any of the Other Notes will operate as a waiver of
such right, power or privilege and no single or partial exercise of any such
right, power or privilege by the Payee will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege. The Maker hereby waives presentment, demand, protest and
notice of dishonor and protest.
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(b) Notices. Any notice required or permitted to be given hereunder
shall be given in accordance with Section 11(h) of the Stock Purchase Agreement.
(c) Severability. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Note will remain in full force and effect. Any provision of this Note held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
(d) Governing Law and Jurisdiction. This Note shall be governed by and
in accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law, provision or rule (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois. Each of the Maker and
Payee submits to the jurisdiction of any state or federal court sitting in
Illinois and any action or proceeding arising out of or relating to this Note
and agrees that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
party with respect thereto. Any party may make service on any other party by
sending or delivering a copy of the process (1) to the party to be served at the
address and in the manner provided for the giving of notices in Section 5(b)
above. Nothing in this Section 5(d), however, shall affect the right of any
party to bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any other manner
permitted by law or in equity. Each party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or in equity.
(e) Parties in Interest. This Note shall bind the Maker and its
successors and assigns. This Note shall not be assigned or transferred by the
Payee without the express prior written consent of the Maker, except by will or,
in default thereof, by operation of law.
(f) Section Headings, Construction. The headings of Sections in this
Note are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Note unless otherwise specified.
(g) Gender. All words used in this Note will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the words "hereof" and "hereunder" and similar references refer to
this Note in its entirety and not to any specific section or subsection hereof.
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IN WITNESS WHEREOF, the Maker has executed and delivered this Note as
of the date first stated above.
THE MAKER:
EIF HOLDINGS, INC.
By: ___________________________
Frank J. Fradella, President
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Schedule A
CONVERSION NOTICE
To EIF Holdings, Inc.:
The undersigned payee of the within Note hereby irrevocably* exercises
the option to convert the principal payment in the amount of ______________
Dollars ($__________) that is due to the undersigned pursuant to the within Note
on ____________, ______ into the number of Conversion Stock determined by
dividing the above designated principal amount by the Conversion Price in
accordance with the terms of the within Note, and directs that the shares
issuable and deliverable upon the conversion, together with any check in payment
for fractional shares, be issued in the name of and delivered to the undersigned
payee.
Dated:__________________________
-----------------------------------
Steven A. Manta
* The word irrevocably may be deleted in any notice given for any
exercise of Payee's conversion rights in connection with a public offering as
described in Section 3(a)(iii) of the Note.
g:\common\corp\notes\smanta.doc
Page 104
CONVERTIBLE PROMISSORY NOTE
The Securities evidenced hereby have not been registered under the Securities
Act of 1933, as amended, and cannot be sold unless they are registered under
said Act. EIF Holdings, Inc. has issued stop transfer instructions with respect
thereto in order to effectuate the foregoing restrictions.
No: A-3
$433,544.22 November 18, 1997
FOR VALUE RECEIVED, EIF Holdings, Inc., a Hawaii corporation (the
"Maker"), promises to pay to the order of Michael J. Chakos, an individual
residing at 645 South Monroe Street, Hinsdale, Illinois 60521 (the "Payee"), in
lawful money of the United States of America, the principal sum of Four Hundred
and Thirty Three Thousand, Five Hundred and Forty Four and 22/100 Dollars
($433,544.22), without interest, in the manner provided below.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of a certain Stock Purchase Agreement, dated
September 30, 1997, by and between, inter alia, the Maker, as "Buyer," and the
Payee, as one of the "Sellers," (the "Stock Purchase Agreement"), whereby the
Maker has agreed to purchase all of the issued and outstanding capital stock of
J.L. Manta, Inc., an Illinois corporation ("Manta"). Contemporaneously with the
execution and delivery of this Note to Payee, Maker is also executing and
delivering a Convertible Promissory Note (in the same form and substance as this
Note, other than the principal amount) to each of the other "Sellers" under the
Stock Purchase Agreement (collectively, the "Other Notes"). This Note and the
Other Notes are being executed by Maker and delivered to Payee and the other
"Sellers" as partial payment of the purchase price to Sellers for the Shares
under the Stock Purchase Agreement. Contemporaneously with the execution and
delivery of this Note to Payee, Maker is also delivering a guaranty of this Note
(the "Guaranty") by American Eco Corporation (the "Guarantor"). This Agreement
is subject to the terms and conditions of the Stock Purchase Agreement, which
are, by this reference, incorporated herein and made a part hereof. Capitalized
terms used in this Note without definition shall have the respective meanings
set forth in the Stock Purchase Agreement.
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1. Payments
(a) Principal Payments. Subject to the other provisions of this Section
1 and the provisions of Section 2 below, the principal amount of this Note shall
be due and payable in accordance with the following payment schedule until all
amounts hereunder have been paid in full:
November 18, 1998 $144,514.72
February 18, 1999 $36,128.68
May 18, 1999 $36,128.68
August 18, 1999 $36,128.69
November 18, 1999 $36,128.69
February 18, 2000 $36,128.69
May 18, 2000 $36,128.69
August 18, 2000 $36,128.69
November 18, 2000 $36,128.69
All payments of principal on this Note shall be made to the Payee at
his address set forth above or at such other place in the United States of
America as the Payee shall designate to the Maker in writing. If any payment of
principal on this Note is due on a day which is not a business day, such payment
shall be due on the next succeeding business day. "Business day" means any day
other than a Saturday, Sunday or legal holiday in the State of Illinois.
(b) Optional Prepayments. The Maker may, without premium or penalty, at
any time and from time to time, prepay all or any portion of the outstanding
principal balance due under this Note. Any partial prepayments shall be applied
to installments of principal in inverse order of their maturity.
(c) Right of Recoupment. The Maker shall, in accordance with Section
8(g) of the Stock Purchase Agreement have the option of recouping all or any
part of any Adverse Consequences it may suffer, to the extent Maker is entitled
to indemnity therefor under Section 8 of the Stock Purchase Agreement, by
notifying the Payee that the Maker is reducing the principal amount outstanding
under this Note. Any such recoupment by Maker shall be made subject to and in
accordance with all of the terms and conditions set forth in Section 8(g) of the
Stock Purchase Agreement and any payments required to be made by the Maker under
Section 8(g) of the Stock Purchase Agreement shall be deemed to be a payment
obligation under this Note. Such reduction shall affect the timing and amount of
payments required under this Note in the same manner as if the Maker had made a
permitted prepayment (without premium or penalty) hereunder.
(d) Interest on Late Payments. Interest on any payment of principal
required hereunder which is not made on the due date for such payment shall
accrue at the Applicable Rate (as defined in the Stock Purchase Agreement) from
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the due date for such payment until the date on which such payment is made. Any
interest due hereunder shall be paid at the same time as the principal payment
is made.
2. Defaults
(a) Events of Default. The occurrence of any one or more of the
following events with respect to the Maker shall constitute an event of default
hereunder ("Event of Default"):
(i) If the Maker shall fail to pay when due the full amount of
any payment of principal or interest on this Note or any of the Other Notes and
such failure continues for five (5) days after the Payee notifies the Maker
thereof in writing; provided, however, that the exercise by the Maker in good
faith (and in accordance with the terms and conditions of Section 8 of the Stock
Purchase Agreement) of its right to withhold payment (or portion thereof) during
the pendency of any arbitration proceeding pursuant to the provisions of Section
8(g) of the Stock Purchase Agreement, whether or not ultimately recoupment is
determined to be justified, shall not constitute an Event of Default.
(ii) The occurrence of an Event of Default under any of the
Other Notes.
(iii) If, pursuant to or within the meaning of the United
States Bankruptcy Code or any other federal or state law relating to insolvency
or relief of debtors (a "Bankruptcy Law"), any of the Maker, Guarantor or Manta
shall (1) commence a voluntary case or proceeding; (2) consent to the entry of
an order for relief against it in an involuntary case; (3) consent to the
appointment of a trustee, receiver, assignee, liquidator or similar official;
(4) make an assignment for the benefit of its creditors; or (5) admit in writing
its inability to pay its debts as they become due.
(iv) The occurrence of a default pursuant to Section 2 of the
Retention Bonus Agreement (as defined in the Stock Purchase Agreement) entered
into between the Maker, Manta and the Payee.
(v) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (1) is for relief against any of the Maker,
Guarantor or Manta in an involuntary case, (2) appoints a trustee, receiver,
assignee, liquidator or similar official for any of the Maker, Guarantor or
Manta or any substantial part of any of the Maker's properties, Guarantor's
properties, or Manta's properties, or (3) orders the liquidation of any of the
Maker, Guarantor or Manta; and in each case the order or decree is not dismissed
within ninety (90) days.
(b) Remedies. Upon the occurrence of an Event of Default hereunder
(unless all Events of Default have been cured by the Maker or waived by the
Payee or the holders of the Other Notes), the holders of Notes representing more
than fifty (50%) percent of the then outstanding principal balance under this
Note and all of the Other Notes (the "Requisite Holders") may, at their option,
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(i) declare the entire unpaid principal balance of this Note and the Other Notes
immediately due and payable regardless of any prior forbearance, (ii) exercise
any and all rights and remedies available to them under applicable law,
including, without limitation, the right to collect from the Maker all sums due
under this Note and the Other Notes, and, (iii) exercise any and all other
rights and remedies available to them at law or in equity. Notwithstanding the
foregoing, upon the occurrence of an Event of Default in connection with a
bankruptcy pursuant to Section 2(a)(iii) or Section 2(a)(v) above, the unpaid
principal amount of, and any and all accrued and unpaid interest on the Note and
any and all accrued and unpaid fees hereunder shall automatically become
immediately due and payable, without presentation, demand, or protest or other
requirements of any kind, all of which are hereby expressly waived by Maker. The
Maker shall pay all reasonable costs and expenses incurred by or on behalf of
the Payee and the holders of the Other Notes in connection with their exercise
of any or all of their rights and remedies under this Note and the Other Notes,
including, without limitation, reasonable attorney's fees. Notwithstanding the
foregoing, the Payee, acting alone, and without the consent or approval of the
Requisite Holders, may, upon the occurrence of an Event of Default as provided
for in Section 2(a)(i) (specifically excluding any Event of Default which shall
result from an Event of Default under any of the Other Notes), exercise and
pursue the foregoing remedies with respect to this Note.
3. Conversion.
(a) Conversion Procedures.
(i) The Payee is entitled, in lieu of receiving any principal
amount due hereunder (whether pursuant to an optional prepayment or by reason of
the occurrence of an Event of Default), to convert all or any portion of the
amount of any such principal payment into a number of shares of the no par value
common stock of Maker (the "Conversion Stock") determined by dividing the
principal amount designated by the Payee to be converted in the Conversion
Notice (as defined hereinbelow) by the Conversion Price (as defined
hereinbelow). The Payee shall exercise its conversion rights hereunder by
delivering to the Maker an executed conversion notice (the "Conversion Notice")
in the form of Schedule A attached hereto not less than thirty (30) days prior
to the scheduled due date of the principal payment to which it relates, or in
the case of any prepayment of principal by Maker or the acceleration of
principal payments upon an Event of Default, at any time prior to the acceptance
by Payee of such principal payment, but in such case, in no event later than ten
(10) days after the date upon which Payee received notice of such event.
(ii) Each such conversion of this Note shall be deemed to have
been affected as of the close of business on the scheduled due date for (or, in
the case of an optional prepayment or of acceleration of principal payments upon
an Event of Default, acceptance of) the principal payment in respect of which
such conversion is being made. At such time that such conversion has been
affected, the Payee shall be deemed to have become the holder of record of the
shares of Conversion Stock represented hereby.
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(iii) Notwithstanding any other provision hereof other than
Section 3(c) below, if a conversion of any portion of this Note is to be made in
connection with a public offering, the conversion of any portion of this Note
may, at the election of Payee, be conditioned upon the consummation of the
public offering in which case such conversion shall not be deemed to be
effective until the consummation of the public offering; provided, however, that
any failure of Maker to make a principal payment as required herein due to such
conditional exercise of the Payee's conversion rights shall in no event be
deemed to constitute an Event of Default nor shall Payee be entitled to any
interest or penalties upon said principal payment or to exercise any of Payee's
rights and remedies hereunder until and unless the Maker has failed to pay the
amount of such principal payment within twenty (20) days after written notice
from the Payee withdrawing the exercise of such conversion rights.
(iv) As soon as possible after conversion has been affected
(but in any event within five (5) business days after conversion has been
affected), the Maker shall deliver to the converting Payee a certificate or
certificates representing the number of shares of Conversion Stock issuable by
reason of such conversion in the name of the Payee.
(v) The issuance of certificates of shares of Conversion Stock
upon conversion of this Note shall be made without charge to the Payee. Upon
conversion of this Note, the Maker shall take all such actions as necessary in
order to ensure that the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid, and non-assessable.
(vi) The Maker shall not close its books against the transfer
of Conversion Stock issued or issuable upon conversion of this Note in any
manner which interferes with the timely conversion of this Note. The Maker shall
assist and cooperate with the Payee with respect to any requirement to make any
governmental filings or obtain any governmental approval prior to or in
connection with the conversion of this Note (including, without limitation,
making any filings required to be made by the Maker).
(vii) All shares of Conversion Stock which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens, and charges. The Maker shall take all such actions
as may be reasonably necessary to assure that all such shares of Conversion
Stock may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
shares of Conversion Stock may be listed (except for official notice of issuance
which shall be immediately delivered by the Company upon each such issuance).
(viii) Principal Payments may not be converted in whole or in
part into increments of less than One Thousand (1000) shares of no par value
Common Stock of the Maker in each instance.
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(b) Conversion Price.
(i) The initial conversion price (the "Conversion Price")
shall be the closing transaction price of Maker's common stock on the date the
Conversion Notice has been received by Maker, with such closing price as
reported on the OTC bulletin board by Bloomberg Business Services. In the event
of the occurrence of any of the following events on or after the original date
of issuance of this Note (A) the Maker shall subdivide its outstanding shares of
no par value Common Stock (the "Common Stock") into a greater number of shares
of Common Stock (including, without limitation, by way of a forward stock
split), (B) the Maker shall combine its outstanding shares of Common Stock into
a smaller number of shares of Common Stock (including, without limitation, by
way of a reverse stock split) or (C) any other recapitalization or any merger,
consolidation, combination or other extraordinary corporate event with respect
to the Maker, the Conversion Price in effect immediately prior thereto and
Payee's Conversion rights hereunder shall be adjusted retroactively as provided
below so that if thereafter Payee shall exercise his conversion rights with
respect to any future principal payment, the Payee shall be entitled to receive
the number and kind of shares of the capital stock of Maker as he would have
owned or have been entitled to receive after the happening of any of the events
described in (A) or (B) above, had he exercised his conversion right immediately
prior to the happening of such event. Any adjustment made to the Conversion
Price pursuant to this Section shall become effective immediately after the
effective date of the subdivision or combination of shares of Common Stock. Such
adjustments shall be made successively whenever any event listed above shall
occur. All calculations under this Section shall be made to the nearest cent.
(ii) Whenever the Conversion Price is adjusted, as herein
provided, the Maker shall promptly cause its independent auditors to provide the
Payee with a certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment (the "Adjustment Certificate").
(c) Additional Limitations on Conversion. Notwithstanding any provision
contained herein to the contrary, Holder shall not be entitled to exercise any
of the conversion rights set forth in this Section 3 prior to the earlier of:
(i) the date the Amendment (as defined in the Stock Purchase Agreement) is
approved by the Maker's stockholders; or (ii) June 30, 1998, and Maker shall not
have any obligations hereunder in respect of any exercise by Employee of any
conversion rights in contravention of this Section 3(c) nor shall Maker be
obligated to provide any of the Alternative Compensation Agreements (as defined
in the Stock Purchase Agreement) with respect thereto; provided that the
foregoing shall not prohibit Payee from exercising such conversion rights with
respect to any outstanding payments which remain due and owing as of the date
set forth above.
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4. Subordination.
(a) "Senior Debt" of Maker as the date of any determination thereof
shall mean (i) all principal, interest and other amounts payable by the Buyer to
Deere Park Capital Management, Inc. (or its affiliates). or any other entity
providing financing to the Maker on or prior to the Closing Date (as defined in
the Stock Purchase Agreement) solely in connection with the Stock Purchase
Agreement and the other Buyer's Transaction Documents (as defined in the Stock
Purchase Agreement) (the "Acquisition Debt") and any modification, extension,
renewal or refinancing of the outstanding principal amount of the Acquisition
Debt, and (ii) if applicable, all principal, interest and other amounts payable
by Manta to Harris Bank under the existing credit facility from Harris Bank to
Manta for the purpose of providing working capital to Manta (the "Harris Debt")
and any modification, extension, renewal or refinancing of the outstanding
principal amount of the Harris Debt to the extent that Maker or Manta assumes or
refinances any of the Harris Debt, and any credit facility secured by Maker or
Manta to replace the Harris Debt.
(b) This note is subordinate and junior in right of payment and
performance, to the extent and the manner set forth herein, to the Senior Debt.
The Senior Debt shall continue to be Senior Debt and entitled to the benefits of
these subordination provisions irrespective of any amendment, modification or
waiver of any term of the Senior Debt (including, but not limited to,
modifications of interest rates and payment terms) in each case in accordance
with the limitations set forth in the definition of Senior Debt. If the Senior
Lender (as hereinafter defined) gives Maker and Payee a written notice ("Default
Notice") which (i) states that one or more events of default (as hereinafter
defined) has occurred and is continuing and (ii) instructs Maker to cease making
payments and Payee to cease accepting and receiving payments, of amounts due
under this Note, then, subject to clause (d) below, unless and until such event
of default shall have been cured or waived or shall have ceased to exist, Maker
will not make and Payee will not ask for, demand, sue for, take or receive from
Maker any direct or indirect payment (in cash, property or otherwise) on account
of the principal of, or premium, if any, or interest on this Note, during any
period after written notice of such default shall be given to Maker by a holder
of any Senior Debt. In the event of: (i) any insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or other
similar proceeding relating to Maker, or to its property, (ii) any proceedings
for liquidation, dissolution or other winding up of Maker, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by Maker for the benefit of creditors, or (iv) any other
marshaling of the assets of Maker, all Senior Debt (including any interest
thereon accruing after the commencement of any such proceedings and any
additional interest that would have accrued thereon but for the commencement of
such proceedings) shall first be paid in full before any payment or
distribution, whether in cash or other property, shall be made to Payee on
account of this Note. Notwithstanding any provision contained in this Note so
long as Senior Lender has not sent Maker and Payee a Default Notice, Maker shall
pay Payee and Payee may receive, accept and apply, the payments provided for
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herein on this Note as and when the same become due, whether by acceleration or
otherwise. For purposes of this Section 4, the term "event of default" shall
mean any event of default, as defined in the loan documents, note, guaranty or
any other agreement, instrument or document under which the Senior Debt is now
or hereafter outstanding (each hereinafter referred to as "Senior Loan
Document," which term shall include any modifications, amendments, extensions,
renewals or replacements thereof in accordance with the limitations set forth in
the definition of Senior Debt) such that the holders thereof may accelerate the
maturity thereof. The term "Senior Lender" shall mean and include the obligee or
other holder of any of the obligations included in the meaning of "Senior Debt,"
including, but not limited to, Deere Park Capital Management, Inc. (and its
affiliates). and its successors and assigns. If any payment or distribution,
whether in cash, securities or other property, shall be received by Payee in
contravention of any of the terms hereof before all the Senior Debt shall have
been paid in full, and a Default Notice shall have preceded such payment or
distribution, such payment or distribution shall be received in trust for the
benefit of, and shall be paid over and delivered and transferred to the holders
of the Senior Debt for application to the payment of all Senior Debt remaining
unpaid, to the extent necessary to pay all such Senior Debt in full, and
thereupon, such payment shall not be deemed to have been received by Payee as a
payment or payments under this Note. In the event of the failure of Payee to
endorse or assign any such payment or distribution, the holder of the Senior
Debt is hereby irrevocably authorized to endorse or assign the same. No present
or future holder of the Senior Debt shall be prejudiced in the right to enforce
subordination of this Note by any act or failure to act on the part of Maker.
(c) The foregoing provisions as to subordination are solely for the
purpose of defining the relative rights of the holders of the Senior Debt, on
the one hand, and Payee, on the other hand. Nothing contained herein shall
impair, as between Maker and Payee, the obligation of Maker, which is
unconditional and absolute, to pay to Payee the principal hereof and any
interest thereon, as and when the same shall become due and payable in
accordance with the terms hereof, or prevent Payee from exercising all rights,
powers and remedies otherwise permitted by applicable law or hereunder upon a
default hereunder, all subject to the rights of the holders of the Senior Debt
to receive cash or other property otherwise payable or deliverable to Payee.
Payee shall take such action (including, without limitation, consent to the
filing of a financing statement with respect thereto) as may, in the opinion of
any holder of Senior Debt at the time outstanding, be necessary or appropriate
to assure the effectiveness of the subordination effected by these provisions.
(d) Notwithstanding anything herein to the contrary, Payee may
accelerate this Note and commence enforcement actions with respect thereto, or
otherwise receive and accept payments under this Note, if a Default Notice has
been given to Maker or Payee by Senior Lender and (1) within 180 days from the
date of such Default Notice, the event or events of default are not waived by
the Senior Lender, eliminated as a result of an amendment or modification of the
Senior Loan Documents or cured, or (2) the Senior Lender accelerates its Senior
Debt and commences enforcement actions with respect thereto or the collateral
therefor. In the event that the Senior Lender has sent Maker and Payee a Default
Notice, Payee shall have no right (except as expressly provided herein) to
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accelerate, enforce any claim with respect to this Note or otherwise take any
action against Maker or Maker's property without the prior written consent of
Senior Lenders, until such time as the Senior Debt has been paid in full and
Senior Lenders have no obligation to make further advances to Maker. Further,
notwithstanding anything hereunder the contrary, subject to the foregoing
restrictions upon acceleration, Payee may pursue any and all rights and remedies
which Payee may have against the Guarantor under the Guaranty, and nothing
herein shall in any manner be deemed to alter or effect Payee's rights or
remedies with respect to said Guarantor.
(e) Maker hereby covenants and agrees to send to Payee, immediately
upon receipt by Maker, any notice of acceleration or commencement of enforcement
actions received by Maker from the Senior Lender.
(f) Each Default Notice shall be deemed to have been given by Senior
Lender to Maker or Payee when delivered in person to such party at the party's
address listed in the Stock Purchase Agreement or when deposited in the United
States mail, first class postage pre-paid or, in the case of telegraphic notice
or overnight courier services, one business day after delivered to the
telegraphic company or overnight courier service with payment provided for, or
in the case of telex or telecopy notice, when sent, verification received, in
each case addressed to Maker or Payee at the respective addresses listed in the
Stock Purchase Agreement or at such other address as either party may designate
by notice to the other in accordance with this paragraph.
5. Miscellaneous.
(a) Amendments and Waivers. Except as otherwise expressly provided
herein, the provisions of this Note and the Other Notes may be amended and the
Maker may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Maker has obtained the written
consent of the holders of more than fifty (50%) percent of the outstanding
principal amount of this Note and the Other Notes; provided that no such action
shall change (i) the rate at which or the manner in which interest accrues on
this Note or the Other Notes or the times at which such interest becomes
payable, (ii) any provision relating to the scheduled payments or prepayments of
principal on this Note or the Other Notes, or (iii) except as provided in
Section 3(b) above, the Conversion Price of this Note or the Other Notes or the
number of shares or the class of stock into which the Notes are convertible,
without the written consent of the holders of at least seventy-five (75%)
percent of the outstanding principal amount of this Note and the Other Notes.
The rights and remedies of the Payee under this Note shall be cumulative and not
alternative. Neither the failure nor any delay in exercising any right, power or
privilege under this Note or any of the Other Notes will operate as a waiver of
such right, power or privilege and no single or partial exercise of any such
right, power or privilege by the Payee will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege. The Maker hereby waives presentment, demand, protest and
notice of dishonor and protest.
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(b) Notices. Any notice required or permitted to be given hereunder
shall be given in accordance with Section 11(h) of the Stock Purchase Agreement.
(c) Severability. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Note will remain in full force and effect. Any provision of this Note held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
(d) Governing Law and Jurisdiction. This Note shall be governed by and
in accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law, provision or rule (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois. Each of the Maker and
Payee submits to the jurisdiction of any state or federal court sitting in
Illinois and any action or proceeding arising out of or relating to this Note
and agrees that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
party with respect thereto. Any party may make service on any other party by
sending or delivering a copy of the process (1) to the party to be served at the
address and in the manner provided for the giving of notices in Section 5(b)
above. Nothing in this Section 5(d), however, shall affect the right of any
party to bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any other manner
permitted by law or in equity. Each party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or in equity.
(e) Parties in Interest. This Note shall bind the Maker and its
successors and assigns. This Note shall not be assigned or transferred by the
Payee without the express prior written consent of the Maker, except by will or,
in default thereof, by operation of law.
(f) Section Headings, Construction. The headings of Sections in this
Note are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Note unless otherwise specified.
(g) Gender. All words used in this Note will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the words "hereof" and "hereunder" and similar references refer to
this Note in its entirety and not to any specific section or subsection hereof.
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IN WITNESS WHEREOF, the Maker has executed and delivered this Note as
of the date first stated above.
THE MAKER:
EIF HOLDINGS, INC.
By: ____________________________
Frank J. Fradella, President
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Schedule A
CONVERSION NOTICE
To EIF Holdings, Inc.:
The undersigned payee of the within Note hereby irrevocably* exercises
the option to convert the principal payment in the amount of ______________
Dollars ($__________) that is due to the undersigned pursuant to the within Note
on ____________, ______ into the number of Conversion Stock determined by
dividing the above designated principal amount by the Conversion Price in
accordance with the terms of the within Note, and directs that the shares
issuable and deliverable upon the conversion, together with any check in payment
for fractional shares, be issued in the name of and delivered to the undersigned
payee.
Dated:__________________________
-----------------------------------
Michael J. Chakos
* The word irrevocably may be deleted in any notice given for any
exercise of Payee's conversion rights in connection with a public offering as
described in Section 3(a)(iii) of the Note.
g:\common\corp\notes\chakos.doc
Page 116
CONVERTIBLE PROMISSORY NOTE
The Securities evidenced hereby have not been registered under the Securities
Act of 1933, as amended, and cannot be sold unless they are registered under
said Act. EIF Holdings, Inc. has issued stop transfer instructions with respect
thereto in order to effectuate the foregoing restrictions.
No: A-4
$103,885.21 November 18, 1997
FOR VALUE RECEIVED, EIF Holdings, Inc., a Hawaii corporation (the
"Maker"), promises to pay to the order of John L. Manta, an individual residing
at 820 South Adams, Hinsdale, Illinois 60521 (the "Payee"), in lawful money of
the United States of America, the principal sum of One Hundred and Three
Thousand, Eight Hundred and Eighty Five and 21/100 Dollars ($103,885.21),
without interest, in the manner provided below.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of a certain Stock Purchase Agreement, dated
September 30, 1997, by and between, inter alia, the Maker, as "Buyer," and the
Payee, as one of the "Sellers," (the "Stock Purchase Agreement"), whereby the
Maker has agreed to purchase all of the issued and outstanding capital stock of
J.L. Manta, Inc., an Illinois corporation ("Manta"). Contemporaneously with the
execution and delivery of this Note to Payee, Maker is also executing and
delivering a Convertible Promissory Note (in the same form and substance as this
Note, other than the principal amount) to each of the other "Sellers" under the
Stock Purchase Agreement (collectively, the "Other Notes"). This Note and the
Other Notes are being executed by Maker and delivered to Payee and the other
"Sellers" as partial payment of the purchase price to Sellers for the Shares
under the Stock Purchase Agreement. Contemporaneously with the execution and
delivery of this Note to Payee, Maker is also delivering a guaranty of this Note
(the "Guaranty") by American Eco Corporation (the "Guarantor"). This Agreement
is subject to the terms and conditions of the Stock Purchase Agreement, which
are, by this reference, incorporated herein and made a part hereof. Capitalized
terms used in this Note without definition shall have the respective meanings
set forth in the Stock Purchase Agreement.
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1. Payments
(a) Principal Payments. Subject to the other provisions of this Section
1 and the provisions of Section 2 below, the principal amount of this Note shall
be due and payable in accordance with the following payment schedule until all
amounts hereunder have been paid in full:
November 18, 1998 $34,628.40
February 18, 1999 $8,657.10
May 18, 1999 $8,657.10
August 18, 1999 $8,657.10
November 18, 1999 $8,657.10
February 18, 2000 $8,657.10
May 18, 2000 $8,657.10
August 18, 2000 $8,657.10
November 18, 2000 $8,657.11
All payments of principal on this Note shall be made to the Payee at
his address set forth above or at such other place in the United States of
America as the Payee shall designate to the Maker in writing. If any payment of
principal on this Note is due on a day which is not a business day, such payment
shall be due on the next succeeding business day. "Business day" means any day
other than a Saturday, Sunday or legal holiday in the State of Illinois.
(b) Optional Prepayments. The Maker may, without premium or penalty, at
any time and from time to time, prepay all or any portion of the outstanding
principal balance due under this Note. Any partial prepayments shall be applied
to installments of principal in inverse order of their maturity.
(c) Right of Recoupment. The Maker shall, in accordance with Section
8(g) of the Stock Purchase Agreement have the option of recouping all or any
part of any Adverse Consequences it may suffer, to the extent Maker is entitled
to indemnity therefor under Section 8 of the Stock Purchase Agreement, by
notifying the Payee that the Maker is reducing the principal amount outstanding
under this Note. Any such recoupment by Maker shall be made subject to and in
accordance with all of the terms and conditions set forth in Section 8(g) of the
Stock Purchase Agreement and any payments required to be made by the Maker under
Section 8(g) of the Stock Purchase Agreement shall be deemed to be a payment
obligation under this Note. Such reduction shall affect the timing and amount of
payments required under this Note in the same manner as if the Maker had made a
permitted prepayment (without premium or penalty) hereunder.
(d) Interest on Late Payments. Interest on any payment of principal
required hereunder which is not made on the due date for such payment shall
accrue at the Applicable Rate (as defined in the Stock Purchase Agreement) from
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the due date for such payment until the date on which such payment is made. Any
interest due hereunder shall be paid at the same time as the principal payment
is made.
2. Defaults
(a) Events of Default. The occurrence of any one or more of the
following events with respect to the Maker shall constitute an event of default
hereunder ("Event of Default"):
(i) If the Maker shall fail to pay when due the full amount of
any payment of principal or interest on this Note or any of the Other Notes and
such failure continues for five (5) days after the Payee notifies the Maker
thereof in writing; provided, however, that the exercise by the Maker in good
faith (and in accordance with the terms and conditions of Section 8 of the Stock
Purchase Agreement) of its right to withhold payment (or portion thereof) during
the pendency of any arbitration proceeding pursuant to the provisions of Section
8(g) of the Stock Purchase Agreement, whether or not ultimately recoupment is
determined to be justified, shall not constitute an Event of Default.
(ii) The occurrence of an Event of Default under any of the
Other Notes.
(iii) If, pursuant to or within the meaning of the United
States Bankruptcy Code or any other federal or state law relating to insolvency
or relief of debtors (a "Bankruptcy Law"), any of the Maker, Guarantor or Manta
shall (1) commence a voluntary case or proceeding; (2) consent to the entry of
an order for relief against it in an involuntary case; (3) consent to the
appointment of a trustee, receiver, assignee, liquidator or similar official;
(4) make an assignment for the benefit of its creditors; or (5) admit in writing
its inability to pay its debts as they become due.
(iv) The occurrence of a default pursuant to Section 2 of the
Retention Bonus Agreement (as defined in the Stock Purchase Agreement) entered
into between the Maker, Manta and the Payee.
(v) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (1) is for relief against any of the Maker,
Guarantor or Manta in an involuntary case, (2) appoints a trustee, receiver,
assignee, liquidator or similar official for any of the Maker, Guarantor or
Manta or any substantial part of any of the Maker's properties, Guarantor's
properties, or Manta's properties, or (3) orders the liquidation of any of the
Maker, Guarantor or Manta; and in each case the order or decree is not dismissed
within ninety (90) days.
(b) Remedies. Upon the occurrence of an Event of Default hereunder
(unless all Events of Default have been cured by the Maker or waived by the
Payee or the holders of the Other Notes), the holders of Notes representing more
than fifty (50%) percent of the then outstanding principal balance under this
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Note and all of the Other Notes (the "Requisite Holders") may, at their option,
(i) declare the entire unpaid principal balance of this Note and the Other Notes
immediately due and payable regardless of any prior forbearance, (ii) exercise
any and all rights and remedies available to them under applicable law,
including, without limitation, the right to collect from the Maker all sums due
under this Note and the Other Notes, and, (iii) exercise any and all other
rights and remedies available to them at law or in equity. Notwithstanding the
foregoing, upon the occurrence of an Event of Default in connection with a
bankruptcy pursuant to Section 2(a)(iii) or Section 2(a)(v) above, the unpaid
principal amount of, and any and all accrued and unpaid interest on the Note and
any and all accrued and unpaid fees hereunder shall automatically become
immediately due and payable, without presentation, demand, or protest or other
requirements of any kind, all of which are hereby expressly waived by Maker. The
Maker shall pay all reasonable costs and expenses incurred by or on behalf of
the Payee and the holders of the Other Notes in connection with their exercise
of any or all of their rights and remedies under this Note and the Other Notes,
including, without limitation, reasonable attorney's fees. Notwithstanding the
foregoing, the Payee, acting alone, and without the consent or approval of the
Requisite Holders, may, upon the occurrence of an Event of Default as provided
for in Section 2(a)(i) (specifically excluding any Event of Default which shall
result from an Event of Default under any of the Other Notes), exercise and
pursue the foregoing remedies with respect to this Note.
3. Conversion.
(a) Conversion Procedures.
(i) The Payee is entitled, in lieu of receiving any principal
amount due hereunder (whether pursuant to an optional prepayment or by reason of
the occurrence of an Event of Default), to convert all or any portion of the
amount of any such principal payment into a number of shares of the no par value
common stock of Maker (the "Conversion Stock") determined by dividing the
principal amount designated by the Payee to be converted in the Conversion
Notice (as defined hereinbelow) by the Conversion Price (as defined
hereinbelow). The Payee shall exercise its conversion rights hereunder by
delivering to the Maker an executed conversion notice (the "Conversion Notice")
in the form of Schedule A attached hereto not less than thirty (30) days prior
to the scheduled due date of the principal payment to which it relates, or in
the case of any prepayment of principal by Maker or the acceleration of
principal payments upon an Event of Default, at any time prior to the acceptance
by Payee of such principal payment, but in such case, in no event later than ten
(10) days after the date upon which Payee received notice of such event.
(ii) Each such conversion of this Note shall be deemed to have
been affected as of the close of business on the scheduled due date for (or, in
the case of an optional prepayment or of acceleration of principal payments upon
an Event of Default, acceptance of) the principal payment in respect of which
such conversion is being made. At such time that such conversion has been
affected, the Payee shall be deemed to have become the holder of record of the
shares of Conversion Stock represented hereby.
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(iii) Notwithstanding any other provision hereof other than
Section 3(c) below, if a conversion of any portion of this Note is to be made in
connection with a public offering, the conversion of any portion of this Note
may, at the election of Payee, be conditioned upon the consummation of the
public offering in which case such conversion shall not be deemed to be
effective until the consummation of the public offering; provided, however, that
any failure of Maker to make a principal payment as required herein due to such
conditional exercise of the Payee's conversion rights shall in no event be
deemed to constitute an Event of Default nor shall Payee be entitled to any
interest or penalties upon said principal payment or to exercise any of Payee's
rights and remedies hereunder until and unless the Maker has failed to pay the
amount of such principal payment within twenty (20) days after written notice
from the Payee withdrawing the exercise of such conversion rights.
(iv) As soon as possible after conversion has been affected
(but in any event within five (5) business days after conversion has been
affected), the Maker shall deliver to the converting Payee a certificate or
certificates representing the number of shares of Conversion Stock issuable by
reason of such conversion in the name of the Payee.
(v) The issuance of certificates of shares of Conversion Stock
upon conversion of this Note shall be made without charge to the Payee. Upon
conversion of this Note, the Maker shall take all such actions as necessary in
order to ensure that the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid, and non-assessable.
(vi) The Maker shall not close its books against the transfer
of Conversion Stock issued or issuable upon conversion of this Note in any
manner which interferes with the timely conversion of this Note. The Maker shall
assist and cooperate with the Payee with respect to any requirement to make any
governmental filings or obtain any governmental approval prior to or in
connection with the conversion of this Note (including, without limitation,
making any filings required to be made by the Maker).
(vii) All shares of Conversion Stock which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens, and charges. The Maker shall take all such actions
as may be reasonably necessary to assure that all such shares of Conversion
Stock may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
shares of Conversion Stock may be listed (except for official notice of issuance
which shall be immediately delivered by the Company upon each such issuance).
(viii) Principal Payments may not be converted in whole or in
part into increments of less than One Thousand (1000) shares of no par value
Common Stock of the Maker in each instance.
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(b) Conversion Price.
(i) The initial conversion price (the "Conversion Price")
shall be the closing transaction price of Maker's common stock on the date the
Conversion Notice has been received by Maker, with such closing price as
reported on the OTC bulletin board by Bloomberg Business Services. In the event
of the occurrence of any of the following events on or after the original date
of issuance of this Note (A) the Maker shall subdivide its outstanding shares of
no par value Common Stock (the "Common Stock") into a greater number of shares
of Common Stock (including, without limitation, by way of a forward stock
split), (B) the Maker shall combine its outstanding shares of Common Stock into
a smaller number of shares of Common Stock (including, without limitation, by
way of a reverse stock split) or (C) any other recapitalization or any merger,
consolidation, combination or other extraordinary corporate event with respect
to the Maker, the Conversion Price in effect immediately prior thereto and
Payee's Conversion rights hereunder shall be adjusted retroactively as provided
below so that if thereafter Payee shall exercise his conversion rights with
respect to any future principal payment, the Payee shall be entitled to receive
the number and kind of shares of the capital stock of Maker as he would have
owned or have been entitled to receive after the happening of any of the events
described in (A) or (B) above, had he exercised his conversion right immediately
prior to the happening of such event. Any adjustment made to the Conversion
Price pursuant to this Section shall become effective immediately after the
effective date of the subdivision or combination of shares of Common Stock. Such
adjustments shall be made successively whenever any event listed above shall
occur. All calculations under this Section shall be made to the nearest cent.
(ii) Whenever the Conversion Price is adjusted, as herein
provided, the Maker shall promptly cause its independent auditors to provide the
Payee with a certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment (the "Adjustment Certificate").
(c) Additional Limitations on Conversion. Notwithstanding any provision
contained herein to the contrary, Holder shall not be entitled to exercise any
of the conversion rights set forth in this Section 3 prior to the earlier of:
(i) the date the Amendment (as defined in the Stock Purchase Agreement) is
approved by the Maker's stockholders; or (ii) June 30, 1998, and Maker shall not
have any obligations hereunder in respect of any exercise by Employee of any
conversion rights in contravention of this Section 3(c) nor shall Maker be
obligated to provide any of the Alternative Compensation Agreements (as defined
in the Stock Purchase Agreement) with respect thereto; provided that the
foregoing shall not prohibit Payee from exercising such conversion rights with
respect to any outstanding payments which remain due and owing as of the date
set forth above.
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4. Subordination.
(a) "Senior Debt" of Maker as the date of any determination thereof
shall mean (i) all principal, interest and other amounts payable by the Buyer to
Deere Park Capital Management, Inc. (or its affiliates) or any other entity
providing financing to the Maker on or prior to the Closing Date (as defined in
the Stock Purchase Agreement) solely in connection with the Stock Purchase
Agreement and the other Buyer's Transaction Documents (as defined in the Stock
Purchase Agreement) (the "Acquisition Debt") and any modification, extension,
renewal or refinancing of the outstanding principal amount of the Acquisition
Debt, and (ii) if applicable, all principal, interest and other amounts payable
by Manta to Harris Bank under the existing credit facility from Harris Bank to
Manta for the purpose of providing working capital to Manta (the "Harris Debt")
and any modification, extension, renewal or refinancing of the outstanding
principal amount of the Harris Debt to the extent that Maker or Manta assumes or
refinances any of the Harris Debt, and any credit facility secured by Maker or
Manta to replace the Harris Debt.
(b) This note is subordinate and junior in right of payment and
performance, to the extent and the manner set forth herein, to the Senior Debt.
The Senior Debt shall continue to be Senior Debt and entitled to the benefits of
these subordination provisions irrespective of any amendment, modification or
waiver of any term of the Senior Debt (including, but not limited to,
modifications of interest rates and payment terms) in each case in accordance
with the limitations set forth in the definition of Senior Debt. If the Senior
Lender (as hereinafter defined) gives Maker and Payee a written notice ("Default
Notice") which (i) states that one or more events of default (as hereinafter
defined) has occurred and is continuing and (ii) instructs Maker to cease making
payments and Payee to cease accepting and receiving payments, of amounts due
under this Note, then, subject to clause (d) below, unless and until such event
of default shall have been cured or waived or shall have ceased to exist, Maker
will not make and Payee will not ask for, demand, sue for, take or receive from
Maker any direct or indirect payment (in cash, property or otherwise) on account
of the principal of, or premium, if any, or interest on this Note, during any
period after written notice of such default shall be given to Maker by a holder
of any Senior Debt. In the event of: (i) any insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or other
similar proceeding relating to Maker, or to its property, (ii) any proceedings
for liquidation, dissolution or other winding up of Maker, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by Maker for the benefit of creditors, or (iv) any other
marshaling of the assets of Maker, all Senior Debt (including any interest
thereon accruing after the commencement of any such proceedings and any
additional interest that would have accrued thereon but for the commencement of
such proceedings) shall first be paid in full before any payment or
distribution, whether in cash or other property, shall be made to Payee on
account of this Note. Notwithstanding any provision contained in this Note so
long as Senior Lender has not sent Maker and Payee a Default Notice, Maker shall
pay Payee and Payee may receive, accept and apply, the payments provided for
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herein on this Note as and when the same become due, whether by acceleration or
otherwise. For purposes of this Section 4, the term "event of default" shall
mean any event of default, as defined in the loan documents, note, guaranty or
any other agreement, instrument or document under which the Senior Debt is now
or hereafter outstanding (each hereinafter referred to as "Senior Loan
Document," which term shall include any modifications, amendments, extensions,
renewals or replacements thereof in accordance with the limitations set forth in
the definition of Senior Debt) such that the holders thereof may accelerate the
maturity thereof. The term "Senior Lender" shall mean and include the obligee or
other holder of any of the obligations included in the meaning of "Senior Debt,"
including, but not limited to, Deere Park Capital Management, Inc. (or its
affiliates) and its successors and assigns. If any payment or distribution,
whether in cash, securities or other property, shall be received by Payee in
contravention of any of the terms hereof before all the Senior Debt shall have
been paid in full, and a Default Notice shall have preceded such payment or
distribution, such payment or distribution shall be received in trust for the
benefit of, and shall be paid over and delivered and transferred to the holders
of the Senior Debt for application to the payment of all Senior Debt remaining
unpaid, to the extent necessary to pay all such Senior Debt in full, and
thereupon, such payment shall not be deemed to have been received by Payee as a
payment or payments under this Note. In the event of the failure of Payee to
endorse or assign any such payment or distribution, the holder of the Senior
Debt is hereby irrevocably authorized to endorse or assign the same. No present
or future holder of the Senior Debt shall be prejudiced in the right to enforce
subordination of this Note by any act or failure to act on the part of Maker.
(c) The foregoing provisions as to subordination are solely for the
purpose of defining the relative rights of the holders of the Senior Debt, on
the one hand, and Payee, on the other hand. Nothing contained herein shall
impair, as between Maker and Payee, the obligation of Maker, which is
unconditional and absolute, to pay to Payee the principal hereof and any
interest thereon, as and when the same shall become due and payable in
accordance with the terms hereof, or prevent Payee from exercising all rights,
powers and remedies otherwise permitted by applicable law or hereunder upon a
default hereunder, all subject to the rights of the holders of the Senior Debt
to receive cash or other property otherwise payable or deliverable to Payee.
Payee shall take such action (including, without limitation, consent to the
filing of a financing statement with respect thereto) as may, in the opinion of
any holder of Senior Debt at the time outstanding, be necessary or appropriate
to assure the effectiveness of the subordination effected by these provisions.
(d) Notwithstanding anything herein to the contrary, Payee may
accelerate this Note and commence enforcement actions with respect thereto, or
otherwise receive and accept payments under this Note, if a Default Notice has
been given to Maker or Payee by Senior Lender and (1) within 180 days from the
date of such Default Notice, the event or events of default are not waived by
the Senior Lender, eliminated as a result of an amendment or modification of the
Senior Loan Documents or cured, or (2) the Senior Lender accelerates its Senior
Debt and commences enforcement actions with respect thereto or the collateral
therefor. In the event that the Senior Lender has sent Maker and Payee a Default
Notice, Payee shall have no right (except as expressly provided herein) to
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accelerate, enforce any claim with respect to this Note or otherwise take any
action against Maker or Maker's property without the prior written consent of
Senior Lenders, until such time as the Senior Debt has been paid in full and
Senior Lenders have no obligation to make further advances to Maker. Further,
notwithstanding anything hereunder the contrary, subject to the foregoing
restrictions upon acceleration, Payee may pursue any and all rights and remedies
which Payee may have against the Guarantor under the Guaranty, and nothing
herein shall in any manner be deemed to alter or effect Payee's rights or
remedies with respect to said Guarantor.
(e) Maker hereby covenants and agrees to send to Payee, immediately
upon receipt by Maker, any notice of acceleration or commencement of enforcement
actions received by Maker from the Senior Lender.
(f) Each Default Notice shall be deemed to have been given by Senior
Lender to Maker or Payee when delivered in person to such party at the party's
address listed in the Stock Purchase Agreement or when deposited in the United
States mail, first class postage pre-paid or, in the case of telegraphic notice
or overnight courier services, one business day after delivered to the
telegraphic company or overnight courier service with payment provided for, or
in the case of telex or telecopy notice, when sent, verification received, in
each case addressed to Maker or Payee at the respective addresses listed in the
Stock Purchase Agreement or at such other address as either party may designate
by notice to the other in accordance with this paragraph.
5. Miscellaneous.
(a) Amendments and Waivers. Except as otherwise expressly provided
herein, the provisions of this Note and the Other Notes may be amended and the
Maker may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Maker has obtained the written
consent of the holders of more than fifty (50%) percent of the outstanding
principal amount of this Note and the Other Notes; provided that no such action
shall change (i) the rate at which or the manner in which interest accrues on
this Note or the Other Notes or the times at which such interest becomes
payable, (ii) any provision relating to the scheduled payments or prepayments of
principal on this Note or the Other Notes, or (iii) except as provided in
Section 3(b) above, the Conversion Price of this Note or the Other Notes or the
number of shares or the class of stock into which the Notes are convertible,
without the written consent of the holders of at least seventy-five (75%)
percent of the outstanding principal amount of this Note and the Other Notes.
The rights and remedies of the Payee under this Note shall be cumulative and not
alternative. Neither the failure nor any delay in exercising any right, power or
privilege under this Note or any of the Other Notes will operate as a waiver of
such right, power or privilege and no single or partial exercise of any such
right, power or privilege by the Payee will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege. The Maker hereby waives presentment, demand, protest and
notice of dishonor and protest.
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(b) Notices. Any notice required or permitted to be given hereunder
shall be given in accordance with Section 11(h) of the Stock Purchase Agreement.
(c) Severability. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Note will remain in full force and effect. Any provision of this Note held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
(d) Governing Law and Jurisdiction. This Note shall be governed by and
in accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law, provision or rule (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois. Each of the Maker and
Payee submits to the jurisdiction of any state or federal court sitting in
Illinois and any action or proceeding arising out of or relating to this Note
and agrees that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
party with respect thereto. Any party may make service on any other party by
sending or delivering a copy of the process (1) to the party to be served at the
address and in the manner provided for the giving of notices in Section 5(b)
above. Nothing in this Section 5(d), however, shall affect the right of any
party to bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any other manner
permitted by law or in equity. Each party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or in equity.
(e) Parties in Interest. This Note shall bind the Maker and its
successors and assigns. This Note shall not be assigned or transferred by the
Payee without the express prior written consent of the Maker, except by will or,
in default thereof, by operation of law.
(f) Section Headings, Construction. The headings of Sections in this
Note are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Note unless otherwise specified.
(g) Gender. All words used in this Note will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the words "hereof" and "hereunder" and similar references refer to
this Note in its entirety and not to any specific section or subsection hereof.
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IN WITNESS WHEREOF, the Maker has executed and delivered this Note as
of the date first stated above.
THE MAKER:
EIF HOLDINGS, INC.
By: ___________________________
Frank J. Fradella, President
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Schedule A
CONVERSION NOTICE
To EIF Holdings, Inc.:
The undersigned payee of the within Note hereby irrevocably* exercises
the option to convert the principal payment in the amount of ______________
Dollars ($__________) that is due to the undersigned pursuant to the within Note
on ____________, ______ into the number of Conversion Stock determined by
dividing the above designated principal amount by the Conversion Price in
accordance with the terms of the within Note, and directs that the shares
issuable and deliverable upon the conversion, together with any check in payment
for fractional shares, be issued in the name of and delivered to the undersigned
payee.
Dated:__________________________
-----------------------------------
John L. Manta
* The word irrevocably may be deleted in any notice given for any
exercise of Payee's conversion rights in connection with a public offering as
described in Section 3(a)(iii) of the Note.
g:\common\corp\notes\jmanta.doc
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CONVERTIBLE PROMISSORY NOTE
The Securities evidenced hereby have not been registered under the Securities
Act of 1933, as amended, and cannot be sold unless they are registered under
said Act. EIF Holdings, Inc. has issued stop transfer instructions with respect
thereto in order to effectuate the foregoing restrictions.
No: A-5
$27,060.05 November 18, 1997
FOR VALUE RECEIVED, EIF Holdings, Inc., a Hawaii corporation (the
"Maker"), promises to pay to the order of John L. Manta, as Trustee of Alexander
Manta Trust, a trust with an address in care of John L. Manta, 820 South Adams,
Hinsdale, Illinois 60521 (the "Payee"), in lawful money of the United States of
America, the principal sum of Twenty Seven Thousand and Sixty and 05/100 Dollars
($27,060.05), without interest, in the manner provided below.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of a certain Stock Purchase Agreement, dated
September 30, 1997, by and between, inter alia, the Maker, as "Buyer," and the
Payee, as one of the "Sellers," (the "Stock Purchase Agreement"), whereby the
Maker has agreed to purchase all of the issued and outstanding capital stock of
J.L. Manta, Inc., an Illinois corporation ("Manta"). Contemporaneously with the
execution and delivery of this Note to Payee, Maker is also executing and
delivering a Convertible Promissory Note (in the same form and substance as this
Note, other than the principal amount) to each of the other "Sellers" under the
Stock Purchase Agreement (collectively, the "Other Notes"). This Note and the
Other Notes are being executed by Maker and delivered to Payee and the other
"Sellers" as partial payment of the purchase price to Sellers for the Shares
under the Stock Purchase Agreement. Contemporaneously with the execution and
delivery of this Note to Payee, Maker is also delivering a guaranty of this Note
(the "Guaranty") by American Eco Corporation (the "Guarantor"). This Agreement
is subject to the terms and conditions of the Stock Purchase Agreement, which
are, by this reference, incorporated herein and made a part hereof. Capitalized
terms used in this Note without definition shall have the respective meanings
set forth in the Stock Purchase Agreement.
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1. Payments
(a) Principal Payments. Subject to the other provisions of this Section
1 and the provisions of Section 2 below, the principal amount of this Note shall
be due and payable in accordance with the following payment schedule until all
amounts hereunder have been paid in full:
November 18, 1998 $9,020.00
February 18, 1999 $2,255.00
May 18, 1999 $2,255.00
August 18, 1999 $2,255.00
November 18, 1999 $2,255.01
February 18, 2000 $2,255.01
May 18, 2000 $2,255.01
August 18, 2000 $2,255.01
November 18, 2000 $2,255.01
All payments of principal on this Note shall be made to the Payee at
his address set forth above or at such other place in the United States of
America as the Payee shall designate to the Maker in writing. If any payment of
principal on this Note is due on a day which is not a business day, such payment
shall be due on the next succeeding business day. "Business day" means any day
other than a Saturday, Sunday or legal holiday in the State of Illinois.
(b) Optional Prepayments. The Maker may, without premium or penalty, at
any time and from time to time, prepay all or any portion of the outstanding
principal balance due under this Note. Any partial prepayments shall be applied
to installments of principal in inverse order of their maturity.
(c) Right of Recoupment. The Maker shall, in accordance with Section
8(g) of the Stock Purchase Agreement have the option of recouping all or any
part of any Adverse Consequences it may suffer, to the extent Maker is entitled
to indemnity therefor under Section 8 of the Stock Purchase Agreement, by
notifying the Payee that the Maker is reducing the principal amount outstanding
under this Note. Any such recoupment by Maker shall be made subject to and in
accordance with all of the terms and conditions set forth in Section 8(g) of the
Stock Purchase Agreement and any payments required to be made by the Maker under
Section 8(g) of the Stock Purchase Agreement shall be deemed to be a payment
obligation under this Note. Such reduction shall affect the timing and amount of
payments required under this Note in the same manner as if the Maker had made a
permitted prepayment (without premium or penalty) hereunder.
(d) Interest on Late Payments. Interest on any payment of principal
required hereunder which is not made on the due date for such payment shall
accrue at the Applicable Rate (as defined in the Stock Purchase Agreement) from
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the due date for such payment until the date on which such payment is made. Any
interest due hereunder shall be paid at the same time as the principal payment
is made.
2. Defaults
(a) Events of Default. The occurrence of any one or more of the
following events with respect to the Maker shall constitute an event of default
hereunder ("Event of Default"):
(i) If the Maker shall fail to pay when due the full amount of
any payment of principal or interest on this Note or any of the Other Notes and
such failure continues for five (5) days after the Payee notifies the Maker
thereof in writing; provided, however, that the exercise by the Maker in good
faith (and in accordance with the terms and conditions of Section 8 of the Stock
Purchase Agreement) of its right to withhold payment (or portion thereof) during
the pendency of any arbitration proceeding pursuant to the provisions of Section
8(g) of the Stock Purchase Agreement, whether or not ultimately recoupment is
determined to be justified, shall not constitute an Event of Default.
(ii) The occurrence of an Event of Default under any of the
Other Notes.
(iii) If, pursuant to or within the meaning of the United
States Bankruptcy Code or any other federal or state law relating to insolvency
or relief of debtors (a "Bankruptcy Law"), any of the Maker, Guarantor or Manta
shall (1) commence a voluntary case or proceeding; (2) consent to the entry of
an order for relief against it in an involuntary case; (3) consent to the
appointment of a trustee, receiver, assignee, liquidator or similar official;
(4) make an assignment for the benefit of its creditors; or (5) admit in writing
its inability to pay its debts as they become due.
(iv) The occurrence of a default pursuant to Section 2 of the
Retention Bonus Agreement (as defined in the Stock Purchase Agreement) entered
into between the Maker, Manta and the Payee.
(v) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (1) is for relief against any of the Maker,
Guarantor or Manta in an involuntary case, (2) appoints a trustee, receiver,
assignee, liquidator or similar official for any of the Maker, Guarantor or
Manta or any substantial part of any of the Maker's properties, Guarantor's
properties, or Manta's properties, or (3) orders the liquidation of any of the
Maker, Guarantor or Manta; and in each case the order or decree is not dismissed
within ninety (90) days.
(b) Remedies. Upon the occurrence of an Event of Default hereunder
(unless all Events of Default have been cured by the Maker or waived by the
Payee or the holders of the Other Notes), the holders of Notes representing more
than fifty (50%) percent of the then outstanding principal balance under this
Note and all of the Other Notes (the "Requisite Holders") may, at their option,
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(i) declare the entire unpaid principal balance of this Note and the Other Notes
immediately due and payable regardless of any prior forbearance, (ii) exercise
any and all rights and remedies available to them under applicable law,
including, without limitation, the right to collect from the Maker all sums due
under this Note and the Other Notes, and, (iii) exercise any and all other
rights and remedies available to them at law or in equity. Notwithstanding the
foregoing, upon the occurrence of an Event of Default in connection with a
bankruptcy pursuant to Section 2(a)(iii) or Section 2(a)(v) above, the unpaid
principal amount of, and any and all accrued and unpaid interest on the Note and
any and all accrued and unpaid fees hereunder shall automatically become
immediately due and payable, without presentation, demand, or protest or other
requirements of any kind, all of which are hereby expressly waived by Maker. The
Maker shall pay all reasonable costs and expenses incurred by or on behalf of
the Payee and the holders of the Other Notes in connection with their exercise
of any or all of their rights and remedies under this Note and the Other Notes,
including, without limitation, reasonable attorney's fees. Notwithstanding the
foregoing, the Payee, acting alone, and without the consent or approval of the
Requisite Holders, may, upon the occurrence of an Event of Default as provided
for in Section 2(a)(i) (specifically excluding any Event of Default which shall
result from an Event of Default under any of the Other Notes), exercise and
pursue the foregoing remedies with respect to this Note.
3. Conversion.
(a) Conversion Procedures.
(i) The Payee is entitled, in lieu of receiving any principal
amount due hereunder (whether pursuant to an optional prepayment or by reason of
the occurrence of an Event of Default), to convert all or any portion of the
amount of any such principal payment into a number of shares of the no par value
common stock of Maker (the "Conversion Stock") determined by dividing the
principal amount designated by the Payee to be converted in the Conversion
Notice (as defined hereinbelow) by the Conversion Price (as defined
hereinbelow). The Payee shall exercise its conversion rights hereunder by
delivering to the Maker an executed conversion notice (the "Conversion Notice")
in the form of Schedule A attached hereto not less than thirty (30) days prior
to the scheduled due date of the principal payment to which it relates, or in
the case of any prepayment of principal by Maker or the acceleration of
principal payments upon an Event of Default, at any time prior to the acceptance
by Payee of such principal payment, but in such case, in no event later than ten
(10) days after the date upon which Payee received notice of such event.
(ii) Each such conversion of this Note shall be deemed to have
been affected as of the close of business on the scheduled due date for (or, in
the case of an optional prepayment or of acceleration of principal payments upon
an Event of Default, acceptance of) the principal payment in respect of which
such conversion is being made. At such time that such conversion has been
affected, the Payee shall be deemed to have become the holder of record of the
shares of Conversion Stock represented hereby.
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(iii) Notwithstanding any other provision hereof other than
Section 3(c) below, if a conversion of any portion of this Note is to be made in
connection with a public offering, the conversion of any portion of this Note
may, at the election of Payee, be conditioned upon the consummation of the
public offering in which case such conversion shall not be deemed to be
effective until the consummation of the public offering; provided, however, that
any failure of Maker to make a principal payment as required herein due to such
conditional exercise of the Payee's conversion rights shall in no event be
deemed to constitute an Event of Default nor shall Payee be entitled to any
interest or penalties upon said principal payment or to exercise any of Payee's
rights and remedies hereunder until and unless the Maker has failed to pay the
amount of such principal payment within twenty (20) days after written notice
from the Payee withdrawing the exercise of such conversion rights.
(iv) As soon as possible after conversion has been affected
(but in any event within five (5) business days after conversion has been
affected), the Maker shall deliver to the converting Payee a certificate or
certificates representing the number of shares of Conversion Stock issuable by
reason of such conversion in the name of the Payee.
(v) The issuance of certificates of shares of Conversion Stock
upon conversion of this Note shall be made without charge to the Payee. Upon
conversion of this Note, the Maker shall take all such actions as necessary in
order to ensure that the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid, and non-assessable.
(vi) The Maker shall not close its books against the transfer
of Conversion Stock issued or issuable upon conversion of this Note in any
manner which interferes with the timely conversion of this Note. The Maker shall
assist and cooperate with the Payee with respect to any requirement to make any
governmental filings or obtain any governmental approval prior to or in
connection with the conversion of this Note (including, without limitation,
making any filings required to be made by the Maker).
(vii) All shares of Conversion Stock which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens, and charges. The Maker shall take all such actions
as may be reasonably necessary to assure that all such shares of Conversion
Stock may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
shares of Conversion Stock may be listed (except for official notice of issuance
which shall be immediately delivered by the Company upon each such issuance).
(viii) Principal Payments may not be converted in whole or in
part into increments of less than One Thousand (1000) shares of no par value
Common Stock of the Maker in each instance.
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(b) Conversion Price.
(i) The initial conversion price (the "Conversion Price")
shall be the closing transaction price of Maker's common stock on the date the
Conversion Notice has been received by Maker, with such closing price as
reported on the OTC bulletin board by Bloomberg Business Services. In the event
of the occurrence of any of the following events on or after the original date
of issuance of this Note (A) the Maker shall subdivide its outstanding shares of
no par value Common Stock (the "Common Stock") into a greater number of shares
of Common Stock (including, without limitation, by way of a forward stock
split), (B) the Maker shall combine its outstanding shares of Common Stock into
a smaller number of shares of Common Stock (including, without limitation, by
way of a reverse stock split) or (C) any other recapitalization or any merger,
consolidation, combination or other extraordinary corporate event with respect
to the Maker, the Conversion Price in effect immediately prior thereto and
Payee's Conversion rights hereunder shall be adjusted retroactively as provided
below so that if thereafter Payee shall exercise his conversion rights with
respect to any future principal payment, the Payee shall be entitled to receive
the number and kind of shares of the capital stock of Maker as he would have
owned or have been entitled to receive after the happening of any of the events
described in (A) or (B) above, had he exercised his conversion right immediately
prior to the happening of such event. Any adjustment made to the Conversion
Price pursuant to this Section shall become effective immediately after the
effective date of the subdivision or combination of shares of Common Stock. Such
adjustments shall be made successively whenever any event listed above shall
occur. All calculations under this Section shall be made to the nearest cent.
(ii) Whenever the Conversion Price is adjusted, as herein
provided, the Maker shall promptly cause its independent auditors to provide the
Payee with a certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment (the "Adjustment Certificate").
(c) Additional Limitations on Conversion. Notwithstanding any provision
contained herein to the contrary, Holder shall not be entitled to exercise any
of the conversion rights set forth in this Section 3 prior to the earlier of:
(i) the date the Amendment (as defined in the Stock Purchase Agreement) is
approved by the Maker's stockholders; or (ii) June 30, 1998, and Maker shall not
have any obligations hereunder in respect of any exercise by Employee of any
conversion rights in contravention of this Section 3(c) nor shall Maker be
obligated to provide any of the Alternative Compensation Agreements (as defined
in the Stock Purchase Agreement) with respect thereto; provided that the
foregoing shall not prohibit Payee from exercising such conversion rights with
respect to any outstanding payments which remain due and owing as of the date
set forth above.
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4. Subordination.
(a) "Senior Debt" of Maker as the date of any determination thereof
shall mean (i) all principal, interest and other amounts payable by the Buyer to
Deere Park Capital Management, Inc. (or its affiliates) or any other entity
providing financing to the Maker on or prior to the Closing Date (as defined in
the Stock Purchase Agreement) solely in connection with the Stock Purchase
Agreement and the other Buyer's Transaction Documents (as defined in the Stock
Purchase Agreement) (the "Acquisition Debt") and any modification, extension,
renewal or refinancing of the outstanding principal amount of the Acquisition
Debt, and (ii) if applicable, all principal, interest and other amounts payable
by Manta to Harris Bank under the existing credit facility from Harris Bank to
Manta for the purpose of providing working capital to Manta (the "Harris Debt")
and any modification, extension, renewal or refinancing of the outstanding
principal amount of the Harris Debt to the extent that Maker or Manta assumes or
refinances any of the Harris Debt, and any credit facility secured by Maker or
Manta to replace the Harris Debt.
(b) This note is subordinate and junior in right of payment and
performance, to the extent and the manner set forth herein, to the Senior Debt.
The Senior Debt shall continue to be Senior Debt and entitled to the benefits of
these subordination provisions irrespective of any amendment, modification or
waiver of any term of the Senior Debt (including, but not limited to,
modifications of interest rates and payment terms) in each case in accordance
with the limitations set forth in the definition of Senior Debt. If the Senior
Lender (as hereinafter defined) gives Maker and Payee a written notice ("Default
Notice") which (i) states that one or more events of default (as hereinafter
defined) has occurred and is continuing and (ii) instructs Maker to cease making
payments and Payee to cease accepting and receiving payments, of amounts due
under this Note, then, subject to clause (d) below, unless and until such event
of default shall have been cured or waived or shall have ceased to exist, Maker
will not make and Payee will not ask for, demand, sue for, take or receive from
Maker any direct or indirect payment (in cash, property or otherwise) on account
of the principal of, or premium, if any, or interest on this Note, during any
period after written notice of such default shall be given to Maker by a holder
of any Senior Debt. In the event of: (i) any insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or other
similar proceeding relating to Maker, or to its property, (ii) any proceedings
for liquidation, dissolution or other winding up of Maker, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by Maker for the benefit of creditors, or (iv) any other
marshaling of the assets of Maker, all Senior Debt (including any interest
thereon accruing after the commencement of any such proceedings and any
additional interest that would have accrued thereon but for the commencement of
such proceedings) shall first be paid in full before any payment or
distribution, whether in cash or other property, shall be made to Payee on
account of this Note. Notwithstanding any provision contained in this Note so
long as Senior Lender has not sent Maker and Payee a Default Notice, Maker shall
pay Payee and Payee may receive, accept and apply, the payments provided for
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herein on this Note as and when the same become due, whether by acceleration or
otherwise. For purposes of this Section 4, the term "event of default" shall
mean any event of default, as defined in the loan documents, note, guaranty or
any other agreement, instrument or document under which the Senior Debt is now
or hereafter outstanding (each hereinafter referred to as "Senior Loan
Document," which term shall include any modifications, amendments, extensions,
renewals or replacements thereof in accordance with the limitations set forth in
the definition of Senior Debt) such that the holders thereof may accelerate the
maturity thereof. The term "Senior Lender" shall mean and include the obligee or
other holder of any of the obligations included in the meaning of "Senior Debt,"
including, but not limited to, Deere Park Capital Management, Inc. (or its
affiliates) and its successors and assigns. If any payment or distribution,
whether in cash, securities or other property, shall be received by Payee in
contravention of any of the terms hereof before all the Senior Debt shall have
been paid in full, and a Default Notice shall have preceded such payment or
distribution, such payment or distribution shall be received in trust for the
benefit of, and shall be paid over and delivered and transferred to the holders
of the Senior Debt for application to the payment of all Senior Debt remaining
unpaid, to the extent necessary to pay all such Senior Debt in full, and
thereupon, such payment shall not be deemed to have been received by Payee as a
payment or payments under this Note. In the event of the failure of Payee to
endorse or assign any such payment or distribution, the holder of the Senior
Debt is hereby irrevocably authorized to endorse or assign the same. No present
or future holder of the Senior Debt shall be prejudiced in the right to enforce
subordination of this Note by any act or failure to act on the part of Maker.
(c) The foregoing provisions as to subordination are solely for the
purpose of defining the relative rights of the holders of the Senior Debt, on
the one hand, and Payee, on the other hand. Nothing contained herein shall
impair, as between Maker and Payee, the obligation of Maker, which is
unconditional and absolute, to pay to Payee the principal hereof and any
interest thereon, as and when the same shall become due and payable in
accordance with the terms hereof, or prevent Payee from exercising all rights,
powers and remedies otherwise permitted by applicable law or hereunder upon a
default hereunder, all subject to the rights of the holders of the Senior Debt
to receive cash or other property otherwise payable or deliverable to Payee.
Payee shall take such action (including, without limitation, consent to the
filing of a financing statement with respect thereto) as may, in the opinion of
any holder of Senior Debt at the time outstanding, be necessary or appropriate
to assure the effectiveness of the subordination effected by these provisions.
(d) Notwithstanding anything herein to the contrary, Payee may
accelerate this Note and commence enforcement actions with respect thereto, or
otherwise receive and accept payments under this Note, if a Default Notice has
been given to Maker or Payee by Senior Lender and (1) within 180 days from the
date of such Default Notice, the event or events of default are not waived by
the Senior Lender, eliminated as a result of an amendment or modification of the
Senior Loan Documents or cured, or (2) the Senior Lender accelerates its Senior
Debt and commences enforcement actions with respect thereto or the collateral
therefor. In the event that the Senior Lender has sent Maker and Payee a Default
Notice, Payee shall have no right (except as expressly provided herein) to
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accelerate, enforce any claim with respect to this Note or otherwise take any
action against Maker or Maker's property without the prior written consent of
Senior Lenders, until such time as the Senior Debt has been paid in full and
Senior Lenders have no obligation to make further advances to Maker. Further,
notwithstanding anything hereunder the contrary, subject to the foregoing
restrictions upon acceleration, Payee may pursue any and all rights and remedies
which Payee may have against the Guarantor under the Guaranty, and nothing
herein shall in any manner be deemed to alter or effect Payee's rights or
remedies with respect to said Guarantor.
(e) Maker hereby covenants and agrees to send to Payee, immediately
upon receipt by Maker, any notice of acceleration or commencement of enforcement
actions received by Maker from the Senior Lender.
(f) Each Default Notice shall be deemed to have been given by Senior
Lender to Maker or Payee when delivered in person to such party at the party's
address listed in the Stock Purchase Agreement or when deposited in the United
States mail, first class postage pre-paid or, in the case of telegraphic notice
or overnight courier services, one business day after delivered to the
telegraphic company or overnight courier service with payment provided for, or
in the case of telex or telecopy notice, when sent, verification received, in
each case addressed to Maker or Payee at the respective addresses listed in the
Stock Purchase Agreement or at such other address as either party may designate
by notice to the other in accordance with this paragraph.
5. Miscellaneous.
(a) Amendments and Waivers. Except as otherwise expressly provided
herein, the provisions of this Note and the Other Notes may be amended and the
Maker may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Maker has obtained the written
consent of the holders of more than fifty (50%) percent of the outstanding
principal amount of this Note and the Other Notes; provided that no such action
shall change (i) the rate at which or the manner in which interest accrues on
this Note or the Other Notes or the times at which such interest becomes
payable, (ii) any provision relating to the scheduled payments or prepayments of
principal on this Note or the Other Notes, or (iii) except as provided in
Section 3(b) above, the Conversion Price of this Note or the Other Notes or the
number of shares or the class of stock into which the Notes are convertible,
without the written consent of the holders of at least seventy-five (75%)
percent of the outstanding principal amount of this Note and the Other Notes.
The rights and remedies of the Payee under this Note shall be cumulative and not
alternative. Neither the failure nor any delay in exercising any right, power or
privilege under this Note or any of the Other Notes will operate as a waiver of
such right, power or privilege and no single or partial exercise of any such
right, power or privilege by the Payee will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege. The Maker hereby waives presentment, demand, protest and
notice of dishonor and protest.
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(b) Notices. Any notice required or permitted to be given hereunder
shall be given in accordance with Section 11(h) of the Stock Purchase Agreement.
(c) Severability. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Note will remain in full force and effect. Any provision of this Note held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
(d) Governing Law and Jurisdiction. This Note shall be governed by and
in accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law, provision or rule (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois. Each of the Maker and
Payee submits to the jurisdiction of any state or federal court sitting in
Illinois and any action or proceeding arising out of or relating to this Note
and agrees that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
party with respect thereto. Any party may make service on any other party by
sending or delivering a copy of the process (1) to the party to be served at the
address and in the manner provided for the giving of notices in Section 5(b)
above. Nothing in this Section 5(d), however, shall affect the right of any
party to bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any other manner
permitted by law or in equity. Each party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or in equity.
(e) Parties in Interest. This Note shall bind the Maker and its
successors and assigns. This Note shall not be assigned or transferred by the
Payee without the express prior written consent of the Maker, except by will or,
in default thereof, by operation of law.
(f) Section Headings, Construction. The headings of Sections in this
Note are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Note unless otherwise specified.
(g) Gender. All words used in this Note will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the words "hereof" and "hereunder" and similar references refer to
this Note in its entirety and not to any specific section or subsection hereof.
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IN WITNESS WHEREOF, the Maker has executed and delivered this Note as
of the date first stated above.
THE MAKER:
EIF HOLDINGS, INC.
By: ____________________________
Frank J. Fradella, President
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Schedule A
CONVERSION NOTICE
To EIF Holdings, Inc.:
The undersigned payee of the within Note hereby irrevocably* exercises
the option to convert the principal payment in the amount of ______________
Dollars ($__________) that is due to the undersigned pursuant to the within Note
on ____________, ______ into the number of Conversion Stock determined by
dividing the above designated principal amount by the Conversion Price in
accordance with the terms of the within Note, and directs that the shares
issuable and deliverable upon the conversion, together with any check in payment
for fractional shares, be issued in the name of and delivered to the undersigned
payee.
Dated:__________________________
-----------------------------------
John L. Manta, as Trustee of
Alexander Manta Trust
* The word irrevocably may be deleted in any notice given for any
exercise of Payee's conversion rights in connection with a public offering as
described in Section 3(a)(iii) of the Note.
g:\common\corp\notes\manta2.doc
Page 140
CONVERTIBLE PROMISSORY NOTE
The Securities evidenced hereby have not been registered under the Securities
Act of 1933, as amended, and cannot be sold unless they are registered under
said Act. EIF Holdings, Inc. has issued stop transfer instructions with respect
thereto in order to effectuate the foregoing restrictions.
No: A-6
$27,060.05 November 18, 1997
FOR VALUE RECEIVED, EIF Holdings, Inc., a Hawaii corporation (the
"Maker"), promises to pay to the order of John L. Manta, as Trustee of Erica
Manta Trust, a trust with an address in care of John L. Manta, 820 South Adams,
Hinsdale, Illinois 60521 (the "Payee"), in lawful money of the United States of
America, the principal sum of Twenty Seven Thousand and Sixty and 05/100 Dollars
($27,060.05), without interest, in the manner provided below.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of a certain Stock Purchase Agreement, dated
September 30, 1997, by and between, inter alia, the Maker, as "Buyer," and the
Payee, as one of the "Sellers," (the "Stock Purchase Agreement"), whereby the
Maker has agreed to purchase all of the issued and outstanding capital stock of
J.L. Manta, Inc., an Illinois corporation ("Manta"). Contemporaneously with the
execution and delivery of this Note to Payee, Maker is also executing and
delivering a Convertible Promissory Note (in the same form and substance as this
Note, other than the principal amount) to each of the other "Sellers" under the
Stock Purchase Agreement (collectively, the "Other Notes"). This Note and the
Other Notes are being executed by Maker and delivered to Payee and the other
"Sellers" as partial payment of the purchase price to Sellers for the Shares
under the Stock Purchase Agreement. Contemporaneously with the execution and
delivery of this Note to Payee, Maker is also delivering a guaranty of this Note
(the "Guaranty") by American Eco Corporation (the "Guarantor"). This Agreement
is subject to the terms and conditions of the Stock Purchase Agreement, which
are, by this reference, incorporated herein and made a part hereof. Capitalized
terms used in this Note without definition shall have the respective meanings
set forth in the Stock Purchase Agreement.
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1. Payments
(a) Principal Payments. Subject to the other provisions of this Section
1 and the provisions of Section 2 below, the principal amount of this Note shall
be due and payable in accordance with the following payment schedule until all
amounts hereunder have been paid in full:
November 18, 1998 $9,020.00
February 18, 1999 $2,255.00
May 18, 1999 $2,255.00
August 18, 1999 $2,255.00
November 18, 1999 $2,255.01
February 18, 2000 $2,255.01
May 18, 2000 $2,255.01
August 18, 2000 $2,255.01
November 18, 2000 $2,255.01
All payments of principal on this Note shall be made to the Payee at
his address set forth above or at such other place in the United States of
America as the Payee shall designate to the Maker in writing. If any payment of
principal on this Note is due on a day which is not a business day, such payment
shall be due on the next succeeding business day. "Business day" means any day
other than a Saturday, Sunday or legal holiday in the State of Illinois.
(b) Optional Prepayments. The Maker may, without premium or penalty, at
any time and from time to time, prepay all or any portion of the outstanding
principal balance due under this Note. Any partial prepayments shall be applied
to installments of principal in inverse order of their maturity.
(c) Right of Recoupment. The Maker shall, in accordance with Section
8(g) of the Stock Purchase Agreement have the option of recouping all or any
part of any Adverse Consequences it may suffer, to the extent Maker is entitled
to indemnity therefor under Section 8 of the Stock Purchase Agreement, by
notifying the Payee that the Maker is reducing the principal amount outstanding
under this Note. Any such recoupment by Maker shall be made subject to and in
accordance with all of the terms and conditions set forth in Section 8(g) of the
Stock Purchase Agreement and any payments required to be made by the Maker under
Section 8(g) of the Stock Purchase Agreement shall be deemed to be a payment
obligation under this Note. Such reduction shall affect the timing and amount of
payments required under this Note in the same manner as if the Maker had made a
permitted prepayment (without premium or penalty) hereunder.
(d) Interest on Late Payments. Interest on any payment of principal
required hereunder which is not made on the due date for such payment shall
accrue at the Applicable Rate (as defined in the Stock Purchase Agreement) from
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the due date for such payment until the date on which such payment is made. Any
interest due hereunder shall be paid at the same time as the principal payment
is made.
2. Defaults
(a) Events of Default. The occurrence of any one or more of the
following events with respect to the Maker shall constitute an event of default
hereunder ("Event of Default"):
(i) If the Maker shall fail to pay when due the full amount of
any payment of principal or interest on this Note or any of the Other Notes and
such failure continues for five (5) days after the Payee notifies the Maker
thereof in writing; provided, however, that the exercise by the Maker in good
faith (and in accordance with the terms and conditions of Section 8 of the Stock
Purchase Agreement) of its right to withhold payment (or portion thereof) during
the pendency of any arbitration proceeding pursuant to the provisions of Section
8(g) of the Stock Purchase Agreement, whether or not ultimately recoupment is
determined to be justified, shall not constitute an Event of Default.
(ii) The occurrence of an Event of Default under any of the
Other Notes.
(iii) If, pursuant to or within the meaning of the United
States Bankruptcy Code or any other federal or state law relating to insolvency
or relief of debtors (a "Bankruptcy Law"), any of the Maker, Guarantor or Manta
shall (1) commence a voluntary case or proceeding; (2) consent to the entry of
an order for relief against it in an involuntary case; (3) consent to the
appointment of a trustee, receiver, assignee, liquidator or similar official;
(4) make an assignment for the benefit of its creditors; or (5) admit in writing
its inability to pay its debts as they become due.
(iv) The occurrence of a default pursuant to Section 2 of the
Retention Bonus Agreement (as defined in the Stock Purchase Agreement) entered
into between the Maker, Manta and the Payee.
(v) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (1) is for relief against any of the Maker,
Guarantor or Manta in an involuntary case, (2) appoints a trustee, receiver,
assignee, liquidator or similar official for any of the Maker, Guarantor or
Manta or any substantial part of any of the Maker's properties, Guarantor's
properties, or Manta's properties, or (3) orders the liquidation of any of the
Maker, Guarantor or Manta; and in each case the order or decree is not dismissed
within ninety (90) days.
(b) Remedies. Upon the occurrence of an Event of Default hereunder
(unless all Events of Default have been cured by the Maker or waived by the
Payee or the holders of the Other Notes), the holders of Notes representing more
than fifty (50%) percent of the then outstanding principal balance under this
Note and all of the Other Notes (the "Requisite Holders") may, at their option,
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(i) declare the entire unpaid principal balance of this Note and the Other Notes
immediately due and payable regardless of any prior forbearance, (ii) exercise
any and all rights and remedies available to them under applicable law,
including, without limitation, the right to collect from the Maker all sums due
under this Note and the Other Notes, and, (iii) exercise any and all other
rights and remedies available to them at law or in equity. Notwithstanding the
foregoing, upon the occurrence of an Event of Default in connection with a
bankruptcy pursuant to Section 2(a)(iii) or Section 2(a)(v) above, the unpaid
principal amount of, and any and all accrued and unpaid interest on the Note and
any and all accrued and unpaid fees hereunder shall automatically become
immediately due and payable, without presentation, demand, or protest or other
requirements of any kind, all of which are hereby expressly waived by Maker. The
Maker shall pay all reasonable costs and expenses incurred by or on behalf of
the Payee and the holders of the Other Notes in connection with their exercise
of any or all of their rights and remedies under this Note and the Other Notes,
including, without limitation, reasonable attorney's fees. Notwithstanding the
foregoing, the Payee, acting alone, and without the consent or approval of the
Requisite Holders, may, upon the occurrence of an Event of Default as provided
for in Section 2(a)(i) (specifically excluding any Event of Default which shall
result from an Event of Default under any of the Other Notes), exercise and
pursue the foregoing remedies with respect to this Note.
3. Conversion.
(a) Conversion Procedures.
(i) The Payee is entitled, in lieu of receiving any principal
amount due hereunder (whether pursuant to an optional prepayment or by reason of
the occurrence of an Event of Default), to convert all or any portion of the
amount of any such principal payment into a number of shares of the no par value
common stock of Maker (the "Conversion Stock") determined by dividing the
principal amount designated by the Payee to be converted in the Conversion
Notice (as defined hereinbelow) by the Conversion Price (as defined
hereinbelow). The Payee shall exercise its conversion rights hereunder by
delivering to the Maker an executed conversion notice (the "Conversion Notice")
in the form of Schedule A attached hereto not less than thirty (30) days prior
to the scheduled due date of the principal payment to which it relates, or in
the case of any prepayment of principal by Maker or the acceleration of
principal payments upon an Event of Default, at any time prior to the acceptance
by Payee of such principal payment, but in such case, in no event later than ten
(10) days after the date upon which Payee received notice of such event.
(ii) Each such conversion of this Note shall be deemed to have
been affected as of the close of business on the scheduled due date for (or, in
the case of an optional prepayment or of acceleration of principal payments upon
an Event of Default, acceptance of) the principal payment in respect of which
such conversion is being made. At such time that such conversion has been
affected, the Payee shall be deemed to have become the holder of record of the
shares of Conversion Stock represented hereby.
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(iii) Notwithstanding any other provision hereof other than
Section 3(c) below, if a conversion of any portion of this Note is to be made in
connection with a public offering, the conversion of any portion of this Note
may, at the election of Payee, be conditioned upon the consummation of the
public offering in which case such conversion shall not be deemed to be
effective until the consummation of the public offering; provided, however, that
any failure of Maker to make a principal payment as required herein due to such
conditional exercise of the Payee's conversion rights shall in no event be
deemed to constitute an Event of Default nor shall Payee be entitled to any
interest or penalties upon said principal payment or to exercise any of Payee's
rights and remedies hereunder until and unless the Maker has failed to pay the
amount of such principal payment within twenty (20) days after written notice
from the Payee withdrawing the exercise of such conversion rights.
(iv) As soon as possible after conversion has been affected
(but in any event within five (5) business days after conversion has been
affected), the Maker shall deliver to the converting Payee a certificate or
certificates representing the number of shares of Conversion Stock issuable by
reason of such conversion in the name of the Payee.
(v) The issuance of certificates of shares of Conversion Stock
upon conversion of this Note shall be made without charge to the Payee. Upon
conversion of this Note, the Maker shall take all such actions as necessary in
order to ensure that the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid, and non-assessable.
(vi) The Maker shall not close its books against the transfer
of Conversion Stock issued or issuable upon conversion of this Note in any
manner which interferes with the timely conversion of this Note. The Maker shall
assist and cooperate with the Payee with respect to any requirement to make any
governmental filings or obtain any governmental approval prior to or in
connection with the conversion of this Note (including, without limitation,
making any filings required to be made by the Maker).
(vii) All shares of Conversion Stock which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens, and charges. The Maker shall take all such actions
as may be reasonably necessary to assure that all such shares of Conversion
Stock may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
shares of Conversion Stock may be listed (except for official notice of issuance
which shall be immediately delivered by the Company upon each such issuance).
(viii) Principal Payments may not be converted in whole or in
part into increments of less than One Thousand (1000) shares of no par value
Common Stock of the Maker in each instance.
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(b) Conversion Price.
(i) The initial conversion price (the "Conversion Price")
shall be the closing transaction price of Maker's common stock on the date the
Conversion Notice has been received by Maker, with such closing price as
reported on the OTC bulletin board by Bloomberg Business Services. In the event
of the occurrence of any of the following events on or after the original date
of issuance of this Note (A) the Maker shall subdivide its outstanding shares of
no par value Common Stock (the "Common Stock") into a greater number of shares
of Common Stock (including, without limitation, by way of a forward stock
split), (B) the Maker shall combine its outstanding shares of Common Stock into
a smaller number of shares of Common Stock (including, without limitation, by
way of a reverse stock split) or (C) any other recapitalization or any merger,
consolidation, combination or other extraordinary corporate event with respect
to the Maker, the Conversion Price in effect immediately prior thereto and
Payee's Conversion rights hereunder shall be adjusted retroactively as provided
below so that if thereafter Payee shall exercise his conversion rights with
respect to any future principal payment, the Payee shall be entitled to receive
the number and kind of shares of the capital stock of Maker as he would have
owned or have been entitled to receive after the happening of any of the events
described in (A) or (B) above, had he exercised his conversion right immediately
prior to the happening of such event. Any adjustment made to the Conversion
Price pursuant to this Section shall become effective immediately after the
effective date of the subdivision or combination of shares of Common Stock. Such
adjustments shall be made successively whenever any event listed above shall
occur. All calculations under this Section shall be made to the nearest cent.
(ii) Whenever the Conversion Price is adjusted, as herein
provided, the Maker shall promptly cause its independent auditors to provide the
Payee with a certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment (the "Adjustment Certificate").
(c) Additional Limitations on Conversion. Notwithstanding any provision
contained herein to the contrary, Holder shall not be entitled to exercise any
of the conversion rights set forth in this Section 3 prior to the earlier of:
(i) the date the Amendment (as defined in the Stock Purchase Agreement) is
approved by the Maker's stockholders; or (ii) June 30, 1998, and Maker shall not
have any obligations hereunder in respect of any exercise by Employee of any
conversion rights in contravention of this Section 3(c) nor shall Maker be
obligated to provide any of the Alternative Compensation Agreements (as defined
in the Stock Purchase Agreement) with respect thereto; provided that the
foregoing shall not prohibit Payee from exercising such conversion rights with
respect to any outstanding payments which remain due and owing as of the date
set forth above.
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4. Subordination.
(a) "Senior Debt" of Maker as the date of any determination thereof
shall mean (i) all principal, interest and other amounts payable by the Buyer to
Deere Park Capital Management, Inc. (or its affiliates) or any other entity
providing financing to the Maker on or prior to the Closing Date (as defined in
the Stock Purchase Agreement) solely in connection with the Stock Purchase
Agreement and the other Buyer's Transaction Documents (as defined in the Stock
Purchase Agreement) (the "Acquisition Debt") and any modification, extension,
renewal or refinancing of the outstanding principal amount of the Acquisition
Debt, and (ii) if applicable, all principal, interest and other amounts payable
by Manta to Harris Bank under the existing credit facility from Harris Bank to
Manta for the purpose of providing working capital to Manta (the "Harris Debt")
and any modification, extension, renewal or refinancing of the outstanding
principal amount of the Harris Debt to the extent that Maker or Manta assumes or
refinances any of the Harris Debt, and any credit facility secured by Maker or
Manta to replace the Harris Debt.
(b) This note is subordinate and junior in right of payment and
performance, to the extent and the manner set forth herein, to the Senior Debt.
The Senior Debt shall continue to be Senior Debt and entitled to the benefits of
these subordination provisions irrespective of any amendment, modification or
waiver of any term of the Senior Debt (including, but not limited to,
modifications of interest rates and payment terms) in each case in accordance
with the limitations set forth in the definition of Senior Debt. If the Senior
Lender (as hereinafter defined) gives Maker and Payee a written notice ("Default
Notice") which (i) states that one or more events of default (as hereinafter
defined) has occurred and is continuing and (ii) instructs Maker to cease making
payments and Payee to cease accepting and receiving payments, of amounts due
under this Note, then, subject to clause (d) below, unless and until such event
of default shall have been cured or waived or shall have ceased to exist, Maker
will not make and Payee will not ask for, demand, sue for, take or receive from
Maker any direct or indirect payment (in cash, property or otherwise) on account
of the principal of, or premium, if any, or interest on this Note, during any
period after written notice of such default shall be given to Maker by a holder
of any Senior Debt. In the event of: (i) any insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or other
similar proceeding relating to Maker, or to its property, (ii) any proceedings
for liquidation, dissolution or other winding up of Maker, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by Maker for the benefit of creditors, or (iv) any other
marshaling of the assets of Maker, all Senior Debt (including any interest
thereon accruing after the commencement of any such proceedings and any
additional interest that would have accrued thereon but for the commencement of
such proceedings) shall first be paid in full before any payment or
distribution, whether in cash or other property, shall be made to Payee on
account of this Note. Notwithstanding any provision contained in this Note so
long as Senior Lender has not sent Maker and Payee a Default Notice, Maker shall
pay Payee and Payee may receive, accept and apply, the payments provided for
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herein on this Note as and when the same become due, whether by acceleration or
otherwise. For purposes of this Section 4, the term "event of default" shall
mean any event of default, as defined in the loan documents, note, guaranty or
any other agreement, instrument or document under which the Senior Debt is now
or hereafter outstanding (each hereinafter referred to as "Senior Loan
Document," which term shall include any modifications, amendments, extensions,
renewals or replacements thereof in accordance with the limitations set forth in
the definition of Senior Debt) such that the holders thereof may accelerate the
maturity thereof. The term "Senior Lender" shall mean and include the obligee or
other holder of any of the obligations included in the meaning of "Senior Debt,"
including, but not limited to, Deere Park Capital Management, Inc. (or its
affiliates) and its successors and assigns. If any payment or distribution,
whether in cash, securities or other property, shall be received by Payee in
contravention of any of the terms hereof before all the Senior Debt shall have
been paid in full, and a Default Notice shall have preceded such payment or
distribution, such payment or distribution shall be received in trust for the
benefit of, and shall be paid over and delivered and transferred to the holders
of the Senior Debt for application to the payment of all Senior Debt remaining
unpaid, to the extent necessary to pay all such Senior Debt in full, and
thereupon, such payment shall not be deemed to have been received by Payee as a
payment or payments under this Note. In the event of the failure of Payee to
endorse or assign any such payment or distribution, the holder of the Senior
Debt is hereby irrevocably authorized to endorse or assign the same. No present
or future holder of the Senior Debt shall be prejudiced in the right to enforce
subordination of this Note by any act or failure to act on the part of Maker.
(c) The foregoing provisions as to subordination are solely for the
purpose of defining the relative rights of the holders of the Senior Debt, on
the one hand, and Payee, on the other hand. Nothing contained herein shall
impair, as between Maker and Payee, the obligation of Maker, which is
unconditional and absolute, to pay to Payee the principal hereof and any
interest thereon, as and when the same shall become due and payable in
accordance with the terms hereof, or prevent Payee from exercising all rights,
powers and remedies otherwise permitted by applicable law or hereunder upon a
default hereunder, all subject to the rights of the holders of the Senior Debt
to receive cash or other property otherwise payable or deliverable to Payee.
Payee shall take such action (including, without limitation, consent to the
filing of a financing statement with respect thereto) as may, in the opinion of
any holder of Senior Debt at the time outstanding, be necessary or appropriate
to assure the effectiveness of the subordination effected by these provisions.
(d) Notwithstanding anything herein to the contrary, Payee may
accelerate this Note and commence enforcement actions with respect thereto, or
otherwise receive and accept payments under this Note, if a Default Notice has
been given to Maker or Payee by Senior Lender and (1) within 180 days from the
date of such Default Notice, the event or events of default are not waived by
the Senior Lender, eliminated as a result of an amendment or modification of the
Senior Loan Documents or cured, or (2) the Senior Lender accelerates its Senior
Debt and commences enforcement actions with respect thereto or the collateral
therefor. In the event that the Senior Lender has sent Maker and Payee a Default
Notice, Payee shall have no right (except as expressly provided herein) to
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accelerate, enforce any claim with respect to this Note or otherwise take any
action against Maker or Maker's property without the prior written consent of
Senior Lenders, until such time as the Senior Debt has been paid in full and
Senior Lenders have no obligation to make further advances to Maker. Further,
notwithstanding anything hereunder the contrary, subject to the foregoing
restrictions upon acceleration, Payee may pursue any and all rights and remedies
which Payee may have against the Guarantor under the Guaranty, and nothing
herein shall in any manner be deemed to alter or effect Payee's rights or
remedies with respect to said Guarantor.
(e) Maker hereby covenants and agrees to send to Payee, immediately
upon receipt by Maker, any notice of acceleration or commencement of enforcement
actions received by Maker from the Senior Lender.
(f) Each Default Notice shall be deemed to have been given by Senior
Lender to Maker or Payee when delivered in person to such party at the party's
address listed in the Stock Purchase Agreement or when deposited in the United
States mail, first class postage pre-paid or, in the case of telegraphic notice
or overnight courier services, one business day after delivered to the
telegraphic company or overnight courier service with payment provided for, or
in the case of telex or telecopy notice, when sent, verification received, in
each case addressed to Maker or Payee at the respective addresses listed in the
Stock Purchase Agreement or at such other address as either party may designate
by notice to the other in accordance with this paragraph.
5. Miscellaneous.
(a) Amendments and Waivers. Except as otherwise expressly provided
herein, the provisions of this Note and the Other Notes may be amended and the
Maker may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Maker has obtained the written
consent of the holders of more than fifty (50%) percent of the outstanding
principal amount of this Note and the Other Notes; provided that no such action
shall change (i) the rate at which or the manner in which interest accrues on
this Note or the Other Notes or the times at which such interest becomes
payable, (ii) any provision relating to the scheduled payments or prepayments of
principal on this Note or the Other Notes, or (iii) except as provided in
Section 3(b) above, the Conversion Price of this Note or the Other Notes or the
number of shares or the class of stock into which the Notes are convertible,
without the written consent of the holders of at least seventy-five (75%)
percent of the outstanding principal amount of this Note and the Other Notes.
The rights and remedies of the Payee under this Note shall be cumulative and not
alternative. Neither the failure nor any delay in exercising any right, power or
privilege under this Note or any of the Other Notes will operate as a waiver of
such right, power or privilege and no single or partial exercise of any such
right, power or privilege by the Payee will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege. The Maker hereby waives presentment, demand, protest and
notice of dishonor and protest.
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(b) Notices. Any notice required or permitted to be given hereunder
shall be given in accordance with Section 11(h) of the Stock Purchase Agreement.
(c) Severability. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Note will remain in full force and effect. Any provision of this Note held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
(d) Governing Law and Jurisdiction. This Note shall be governed by and
in accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law, provision or rule (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois. Each of the Maker and
Payee submits to the jurisdiction of any state or federal court sitting in
Illinois and any action or proceeding arising out of or relating to this Note
and agrees that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
party with respect thereto. Any party may make service on any other party by
sending or delivering a copy of the process (1) to the party to be served at the
address and in the manner provided for the giving of notices in Section 5(b)
above. Nothing in this Section 5(d), however, shall affect the right of any
party to bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any other manner
permitted by law or in equity. Each party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or in equity.
(e) Parties in Interest. This Note shall bind the Maker and its
successors and assigns. This Note shall not be assigned or transferred by the
Payee without the express prior written consent of the Maker, except by will or,
in default thereof, by operation of law.
(f) Section Headings, Construction. The headings of Sections in this
Note are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Note unless otherwise specified.
(g) Gender. All words used in this Note will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the words "hereof" and "hereunder" and similar references refer to
this Note in its entirety and not to any specific section or subsection hereof.
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IN WITNESS WHEREOF, the Maker has executed and delivered this Note as
of the date first stated above.
THE MAKER:
EIF HOLDINGS, INC.
By: ____________________________
Frank J. Fradella, President
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Schedule A
CONVERSION NOTICE
To EIF Holdings, Inc.:
The undersigned payee of the within Note hereby irrevocably* exercises
the option to convert the principal payment in the amount of ______________
Dollars ($__________) that is due to the undersigned pursuant to the within Note
on ____________, ______ into the number of Conversion Stock determined by
dividing the above designated principal amount by the Conversion Price in
accordance with the terms of the within Note, and directs that the shares
issuable and deliverable upon the conversion, together with any check in payment
for fractional shares, be issued in the name of and delivered to the undersigned
payee.
Dated:__________________________
-----------------------------------
John L. Manta, as Trustee of Erica Manta Trust
* The word irrevocably may be deleted in any notice given for any
exercise of Payee's conversion rights in connection with a public offering as
described in Section 3(a)(iii) of the Note.
g:\common\corp\notes\manta4.doc
Page 152
CONVERTIBLE PROMISSORY NOTE
The Securities evidenced hereby have not been registered under the Securities
Act of 1933, as amended, and cannot be sold unless they are registered under
said Act. EIF Holdings, Inc. has issued stop transfer instructions with respect
thereto in order to effectuate the foregoing restrictions.
No: A-7
$27,060.05 November 18, 1997
FOR VALUE RECEIVED, EIF Holdings, Inc., a Hawaii corporation (the
"Maker"), promises to pay to the order of John L. Manta, as Trustee of Zachary
Manta Trust, a trust with an address in care of John L. Manta, 820 South Adams,
Hinsdale, Illinois 60521 (the "Payee"), in lawful money of the United States of
America, the principal sum of Twenty Seven Thousand and Sixty and 05/100 Dollars
($27,060.05), without interest, in the manner provided below.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of a certain Stock Purchase Agreement, dated
September 30, 1997, by and between, inter alia, the Maker, as "Buyer," and the
Payee, as one of the "Sellers," (the "Stock Purchase Agreement"), whereby the
Maker has agreed to purchase all of the issued and outstanding capital stock of
J.L. Manta, Inc., an Illinois corporation ("Manta"). Contemporaneously with the
execution and delivery of this Note to Payee, Maker is also executing and
delivering a Convertible Promissory Note (in the same form and substance as this
Note, other than the principal amount) to each of the other "Sellers" under the
Stock Purchase Agreement (collectively, the "Other Notes"). This Note and the
Other Notes are being executed by Maker and delivered to Payee and the other
"Sellers" as partial payment of the purchase price to Sellers for the Shares
under the Stock Purchase Agreement. Contemporaneously with the execution and
delivery of this Note to Payee, Maker is also delivering a guaranty of this Note
(the "Guaranty") by American Eco Corporation (the "Guarantor"). This Agreement
is subject to the terms and conditions of the Stock Purchase Agreement, which
are, by this reference, incorporated herein and made a part hereof. Capitalized
terms used in this Note without definition shall have the respective meanings
set forth in the Stock Purchase Agreement.
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1. Payments
(a) Principal Payments. Subject to the other provisions of this Section
1 and the provisions of Section 2 below, the principal amount of this Note shall
be due and payable in accordance with the following payment schedule until all
amounts hereunder have been paid in full:
November 18, 1998 $9,020.00
February 18, 1999 $2,255.00
May 18, 1999 $2,255.00
August 18, 1999 $2,255.00
November 18, 1999 $2,255.01
February 18, 2000 $2,255.01
May 18, 2000 $2,255.01
August 18, 2000 $2,255.01
November 18, 2000 $2,255.01
All payments of principal on this Note shall be made to the Payee at
his address set forth above or at such other place in the United States of
America as the Payee shall designate to the Maker in writing. If any payment of
principal on this Note is due on a day which is not a business day, such payment
shall be due on the next succeeding business day. "Business day" means any day
other than a Saturday, Sunday or legal holiday in the State of Illinois.
(b) Optional Prepayments. The Maker may, without premium or penalty, at
any time and from time to time, prepay all or any portion of the outstanding
principal balance due under this Note. Any partial prepayments shall be applied
to installments of principal in inverse order of their maturity.
(c) Right of Recoupment. The Maker shall, in accordance with Section
8(g) of the Stock Purchase Agreement have the option of recouping all or any
part of any Adverse Consequences it may suffer, to the extent Maker is entitled
to indemnity therefor under Section 8 of the Stock Purchase Agreement, by
notifying the Payee that the Maker is reducing the principal amount outstanding
under this Note. Any such recoupment by Maker shall be made subject to and in
accordance with all of the terms and conditions set forth in Section 8(g) of the
Stock Purchase Agreement and any payments required to be made by the Maker under
Section 8(g) of the Stock Purchase Agreement shall be deemed to be a payment
obligation under this Note. Such reduction shall affect the timing and amount of
payments required under this Note in the same manner as if the Maker had made a
permitted prepayment (without premium or penalty) hereunder.
(d) Interest on Late Payments. Interest on any payment of principal
required hereunder which is not made on the due date for such payment shall
accrue at the Applicable Rate (as defined in the Stock Purchase Agreement) from
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the due date for such payment until the date on which such payment is made. Any
interest due hereunder shall be paid at the same time as the principal payment
is made.
2. Defaults
(a) Events of Default. The occurrence of any one or more of the
following events with respect to the Maker shall constitute an event of default
hereunder ("Event of Default"):
(i) If the Maker shall fail to pay when due the full amount of
any payment of principal or interest on this Note or any of the Other Notes and
such failure continues for five (5) days after the Payee notifies the Maker
thereof in writing; provided, however, that the exercise by the Maker in good
faith (and in accordance with the terms and conditions of Section 8 of the Stock
Purchase Agreement) of its right to withhold payment (or portion thereof) during
the pendency of any arbitration proceeding pursuant to the provisions of Section
8(g) of the Stock Purchase Agreement, whether or not ultimately recoupment is
determined to be justified, shall not constitute an Event of Default.
(ii) The occurrence of an Event of Default under any of the
Other Notes.
(iii) If, pursuant to or within the meaning of the United
States Bankruptcy Code or any other federal or state law relating to insolvency
or relief of debtors (a "Bankruptcy Law"), any of the Maker, Guarantor or Manta
shall (1) commence a voluntary case or proceeding; (2) consent to the entry of
an order for relief against it in an involuntary case; (3) consent to the
appointment of a trustee, receiver, assignee, liquidator or similar official;
(4) make an assignment for the benefit of its creditors; or (5) admit in writing
its inability to pay its debts as they become due.
(iv) The occurrence of a default pursuant to Section 2 of the
Retention Bonus Agreement (as defined in the Stock Purchase Agreement) entered
into between the Maker, Manta and the Payee.
(v) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (1) is for relief against any of the Maker,
Guarantor or Manta in an involuntary case, (2) appoints a trustee, receiver,
assignee, liquidator or similar official for any of the Maker, Guarantor or
Manta or any substantial part of any of the Maker's properties, Guarantor's
properties, or Manta's properties, or (3) orders the liquidation of any of the
Maker, Guarantor or Manta; and in each case the order or decree is not dismissed
within ninety (90) days.
(b) Remedies. Upon the occurrence of an Event of Default hereunder
(unless all Events of Default have been cured by the Maker or waived by the
Payee or the holders of the Other Notes), the holders of Notes representing more
than fifty (50%) percent of the then outstanding principal balance under this
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Note and all of the Other Notes (the "Requisite Holders") may, at their option,
(i) declare the entire unpaid principal balance of this Note and the Other Notes
immediately due and payable regardless of any prior forbearance, (ii) exercise
any and all rights and remedies available to them under applicable law,
including, without limitation, the right to collect from the Maker all sums due
under this Note and the Other Notes, and, (iii) exercise any and all other
rights and remedies available to them at law or in equity. Notwithstanding the
foregoing, upon the occurrence of an Event of Default in connection with a
bankruptcy pursuant to Section 2(a)(iii) or Section 2(a)(v) above, the unpaid
principal amount of, and any and all accrued and unpaid interest on the Note and
any and all accrued and unpaid fees hereunder shall automatically become
immediately due and payable, without presentation, demand, or protest or other
requirements of any kind, all of which are hereby expressly waived by Maker. The
Maker shall pay all reasonable costs and expenses incurred by or on behalf of
the Payee and the holders of the Other Notes in connection with their exercise
of any or all of their rights and remedies under this Note and the Other Notes,
including, without limitation, reasonable attorney's fees. Notwithstanding the
foregoing, the Payee, acting alone, and without the consent or approval of the
Requisite Holders, may, upon the occurrence of an Event of Default as provided
for in Section 2(a)(i) (specifically excluding any Event of Default which shall
result from an Event of Default under any of the Other Notes), exercise and
pursue the foregoing remedies with respect to this Note.
3. Conversion.
(a) Conversion Procedures.
(i) The Payee is entitled, in lieu of receiving any principal
amount due hereunder (whether pursuant to an optional prepayment or by reason of
the occurrence of an Event of Default), to convert all or any portion of the
amount of any such principal payment into a number of shares of the no par value
common stock of Maker (the "Conversion Stock") determined by dividing the
principal amount designated by the Payee to be converted in the Conversion
Notice (as defined hereinbelow) by the Conversion Price (as defined
hereinbelow). The Payee shall exercise its conversion rights hereunder by
delivering to the Maker an executed conversion notice (the "Conversion Notice")
in the form of Schedule A attached hereto not less than thirty (30) days prior
to the scheduled due date of the principal payment to which it relates, or in
the case of any prepayment of principal by Maker or the acceleration of
principal payments upon an Event of Default, at any time prior to the acceptance
by Payee of such principal payment, but in such case, in no event later than ten
(10) days after the date upon which Payee received notice of such event.
(ii) Each such conversion of this Note shall be deemed to have
been affected as of the close of business on the scheduled due date for (or, in
the case of an optional prepayment or of acceleration of principal payments upon
an Event of Default, acceptance of) the principal payment in respect of which
such conversion is being made. At such time that such conversion has been
affected, the Payee shall be deemed to have become the holder of record of the
shares of Conversion Stock represented hereby.
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(iii) Notwithstanding any other provision hereof other than
Section 3(c) below, if a conversion of any portion of this Note is to be made in
connection with a public offering, the conversion of any portion of this Note
may, at the election of Payee, be conditioned upon the consummation of the
public offering in which case such conversion shall not be deemed to be
effective until the consummation of the public offering; provided, however, that
any failure of Maker to make a principal payment as required herein due to such
conditional exercise of the Payee's conversion rights shall in no event be
deemed to constitute an Event of Default nor shall Payee be entitled to any
interest or penalties upon said principal payment or to exercise any of Payee's
rights and remedies hereunder until and unless the Maker has failed to pay the
amount of such principal payment within twenty (20) days after written notice
from the Payee withdrawing the exercise of such conversion rights.
(iv) As soon as possible after conversion has been affected
(but in any event within five (5) business days after conversion has been
affected), the Maker shall deliver to the converting Payee a certificate or
certificates representing the number of shares of Conversion Stock issuable by
reason of such conversion in the name of the Payee.
(v) The issuance of certificates of shares of Conversion Stock
upon conversion of this Note shall be made without charge to the Payee. Upon
conversion of this Note, the Maker shall take all such actions as necessary in
order to ensure that the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid, and non-assessable.
(vi) The Maker shall not close its books against the transfer
of Conversion Stock issued or issuable upon conversion of this Note in any
manner which interferes with the timely conversion of this Note. The Maker shall
assist and cooperate with the Payee with respect to any requirement to make any
governmental filings or obtain any governmental approval prior to or in
connection with the conversion of this Note (including, without limitation,
making any filings required to be made by the Maker).
(vii) All shares of Conversion Stock which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens, and charges. The Maker shall take all such actions
as may be reasonably necessary to assure that all such shares of Conversion
Stock may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
shares of Conversion Stock may be listed (except for official notice of issuance
which shall be immediately delivered by the Company upon each such issuance).
(viii) Principal Payments may not be converted in whole or in
part into increments of less than One Thousand (1000) shares of no par value
Common Stock of the Maker in each instance.
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(b) Conversion Price.
(i) The initial conversion price (the "Conversion Price")
shall be the closing transaction price of Maker's common stock on the date the
Conversion Notice has been received by Maker, with such closing price as
reported on the OTC bulletin board by Bloomberg Business Services. In the event
of the occurrence of any of the following events on or after the original date
of issuance of this Note (A) the Maker shall subdivide its outstanding shares of
no par value Common Stock (the "Common Stock") into a greater number of shares
of Common Stock (including, without limitation, by way of a forward stock
split), (B) the Maker shall combine its outstanding shares of Common Stock into
a smaller number of shares of Common Stock (including, without limitation, by
way of a reverse stock split) or (C) any other recapitalization or any merger,
consolidation, combination or other extraordinary corporate event with respect
to the Maker, the Conversion Price in effect immediately prior thereto and
Payee's Conversion rights hereunder shall be adjusted retroactively as provided
below so that if thereafter Payee shall exercise his conversion rights with
respect to any future principal payment, the Payee shall be entitled to receive
the number and kind of shares of the capital stock of Maker as he would have
owned or have been entitled to receive after the happening of any of the events
described in (A) or (B) above, had he exercised his conversion right immediately
prior to the happening of such event. Any adjustment made to the Conversion
Price pursuant to this Section shall become effective immediately after the
effective date of the subdivision or combination of shares of Common Stock. Such
adjustments shall be made successively whenever any event listed above shall
occur. All calculations under this Section shall be made to the nearest cent.
(ii) Whenever the Conversion Price is adjusted, as herein
provided, the Maker shall promptly cause its independent auditors to provide the
Payee with a certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment (the "Adjustment Certificate").
(c) Additional Limitations on Conversion. Notwithstanding any provision
contained herein to the contrary, Holder shall not be entitled to exercise any
of the conversion rights set forth in this Section 3 prior to the earlier of:
(i) the date the Amendment (as defined in the Stock Purchase Agreement) is
approved by the Maker's stockholders; or (ii) June 30, 1998, and Maker shall not
have any obligations hereunder in respect of any exercise by Employee of any
conversion rights in contravention of this Section 3(c) nor shall Maker be
obligated to provide any of the Alternative Compensation Agreements (as defined
in the Stock Purchase Agreement) with respect thereto; provided that the
foregoing shall not prohibit Payee from exercising such conversion rights with
respect to any outstanding payments which remain due and owing as of the date
set forth above.
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4. Subordination.
(a) "Senior Debt" of Maker as the date of any determination thereof
shall mean (i) all principal, interest and other amounts payable by the Buyer to
Deere Park Capital Management, Inc. (or its affiliates) or any other entity
providing financing to the Maker on or prior to the Closing Date (as defined in
the Stock Purchase Agreement) solely in connection with the Stock Purchase
Agreement and the other Buyer's Transaction Documents (as defined in the Stock
Purchase Agreement) (the "Acquisition Debt") and any modification, extension,
renewal or refinancing of the outstanding principal amount of the Acquisition
Debt, and (ii) if applicable, all principal, interest and other amounts payable
by Manta to Harris Bank under the existing credit facility from Harris Bank to
Manta for the purpose of providing working capital to Manta (the "Harris Debt")
and any modification, extension, renewal or refinancing of the outstanding
principal amount of the Harris Debt to the extent that Maker or Manta assumes or
refinances any of the Harris Debt, and any credit facility secured by Maker or
Manta to replace the Harris Debt.
(b) This note is subordinate and junior in right of payment and
performance, to the extent and the manner set forth herein, to the Senior Debt.
The Senior Debt shall continue to be Senior Debt and entitled to the benefits of
these subordination provisions irrespective of any amendment, modification or
waiver of any term of the Senior Debt (including, but not limited to,
modifications of interest rates and payment terms) in each case in accordance
with the limitations set forth in the definition of Senior Debt. If the Senior
Lender (as hereinafter defined) gives Maker and Payee a written notice ("Default
Notice") which (i) states that one or more events of default (as hereinafter
defined) has occurred and is continuing and (ii) instructs Maker to cease making
payments and Payee to cease accepting and receiving payments, of amounts due
under this Note, then, subject to clause (d) below, unless and until such event
of default shall have been cured or waived or shall have ceased to exist, Maker
will not make and Payee will not ask for, demand, sue for, take or receive from
Maker any direct or indirect payment (in cash, property or otherwise) on account
of the principal of, or premium, if any, or interest on this Note, during any
period after written notice of such default shall be given to Maker by a holder
of any Senior Debt. In the event of: (i) any insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or other
similar proceeding relating to Maker, or to its property, (ii) any proceedings
for liquidation, dissolution or other winding up of Maker, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by Maker for the benefit of creditors, or (iv) any other
marshaling of the assets of Maker, all Senior Debt (including any interest
thereon accruing after the commencement of any such proceedings and any
additional interest that would have accrued thereon but for the commencement of
such proceedings) shall first be paid in full before any payment or
distribution, whether in cash or other property, shall be made to Payee on
account of this Note. Notwithstanding any provision contained in this Note so
long as Senior Lender has not sent Maker and Payee a Default Notice, Maker shall
pay Payee and Payee may receive, accept and apply, the payments provided for
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herein on this Note as and when the same become due, whether by acceleration or
otherwise. For purposes of this Section 4, the term "event of default" shall
mean any event of default, as defined in the loan documents, note, guaranty or
any other agreement, instrument or document under which the Senior Debt is now
or hereafter outstanding (each hereinafter referred to as "Senior Loan
Document," which term shall include any modifications, amendments, extensions,
renewals or replacements thereof in accordance with the limitations set forth in
the definition of Senior Debt) such that the holders thereof may accelerate the
maturity thereof. The term "Senior Lender" shall mean and include the obligee or
other holder of any of the obligations included in the meaning of "Senior Debt,"
including, but not limited to, Deere Park Capital Management, Inc. (or its
affiliates) and its successors and assigns. If any payment or distribution,
whether in cash, securities or other property, shall be received by Payee in
contravention of any of the terms hereof before all the Senior Debt shall have
been paid in full, and a Default Notice shall have preceded such payment or
distribution, such payment or distribution shall be received in trust for the
benefit of, and shall be paid over and delivered and transferred to the holders
of the Senior Debt for application to the payment of all Senior Debt remaining
unpaid, to the extent necessary to pay all such Senior Debt in full, and
thereupon, such payment shall not be deemed to have been received by Payee as a
payment or payments under this Note. In the event of the failure of Payee to
endorse or assign any such payment or distribution, the holder of the Senior
Debt is hereby irrevocably authorized to endorse or assign the same. No present
or future holder of the Senior Debt shall be prejudiced in the right to enforce
subordination of this Note by any act or failure to act on the part of Maker.
(c) The foregoing provisions as to subordination are solely for the
purpose of defining the relative rights of the holders of the Senior Debt, on
the one hand, and Payee, on the other hand. Nothing contained herein shall
impair, as between Maker and Payee, the obligation of Maker, which is
unconditional and absolute, to pay to Payee the principal hereof and any
interest thereon, as and when the same shall become due and payable in
accordance with the terms hereof, or prevent Payee from exercising all rights,
powers and remedies otherwise permitted by applicable law or hereunder upon a
default hereunder, all subject to the rights of the holders of the Senior Debt
to receive cash or other property otherwise payable or deliverable to Payee.
Payee shall take such action (including, without limitation, consent to the
filing of a financing statement with respect thereto) as may, in the opinion of
any holder of Senior Debt at the time outstanding, be necessary or appropriate
to assure the effectiveness of the subordination effected by these provisions.
(d) Notwithstanding anything herein to the contrary, Payee may
accelerate this Note and commence enforcement actions with respect thereto, or
otherwise receive and accept payments under this Note, if a Default Notice has
been given to Maker or Payee by Senior Lender and (1) within 180 days from the
date of such Default Notice, the event or events of default are not waived by
the Senior Lender, eliminated as a result of an amendment or modification of the
Senior Loan Documents or cured, or (2) the Senior Lender accelerates its Senior
Debt and commences enforcement actions with respect thereto or the collateral
therefor. In the event that the Senior Lender has sent Maker and Payee a Default
Notice, Payee shall have no right (except as expressly provided herein) to
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accelerate, enforce any claim with respect to this Note or otherwise take any
action against Maker or Maker's property without the prior written consent of
Senior Lenders, until such time as the Senior Debt has been paid in full and
Senior Lenders have no obligation to make further advances to Maker. Further,
notwithstanding anything hereunder the contrary, subject to the foregoing
restrictions upon acceleration, Payee may pursue any and all rights and remedies
which Payee may have against the Guarantor under the Guaranty, and nothing
herein shall in any manner be deemed to alter or effect Payee's rights or
remedies with respect to said Guarantor.
(e) Maker hereby covenants and agrees to send to Payee, immediately
upon receipt by Maker, any notice of acceleration or commencement of enforcement
actions received by Maker from the Senior Lender.
(f) Each Default Notice shall be deemed to have been given by Senior
Lender to Maker or Payee when delivered in person to such party at the party's
address listed in the Stock Purchase Agreement or when deposited in the United
States mail, first class postage pre-paid or, in the case of telegraphic notice
or overnight courier services, one business day after delivered to the
telegraphic company or overnight courier service with payment provided for, or
in the case of telex or telecopy notice, when sent, verification received, in
each case addressed to Maker or Payee at the respective addresses listed in the
Stock Purchase Agreement or at such other address as either party may designate
by notice to the other in accordance with this paragraph.
5. Miscellaneous.
(a) Amendments and Waivers. Except as otherwise expressly provided
herein, the provisions of this Note and the Other Notes may be amended and the
Maker may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Maker has obtained the written
consent of the holders of more than fifty (50%) percent of the outstanding
principal amount of this Note and the Other Notes; provided that no such action
shall change (i) the rate at which or the manner in which interest accrues on
this Note or the Other Notes or the times at which such interest becomes
payable, (ii) any provision relating to the scheduled payments or prepayments of
principal on this Note or the Other Notes, or (iii) except as provided in
Section 3(b) above, the Conversion Price of this Note or the Other Notes or the
number of shares or the class of stock into which the Notes are convertible,
without the written consent of the holders of at least seventy-five (75%)
percent of the outstanding principal amount of this Note and the Other Notes.
The rights and remedies of the Payee under this Note shall be cumulative and not
alternative. Neither the failure nor any delay in exercising any right, power or
privilege under this Note or any of the Other Notes will operate as a waiver of
such right, power or privilege and no single or partial exercise of any such
right, power or privilege by the Payee will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege. The Maker hereby waives presentment, demand, protest and
notice of dishonor and protest.
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(b) Notices. Any notice required or permitted to be given hereunder
shall be given in accordance with Section 11(h) of the Stock Purchase Agreement.
(c) Severability. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Note will remain in full force and effect. Any provision of this Note held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
(d) Governing Law and Jurisdiction. This Note shall be governed by and
in accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law, provision or rule (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois. Each of the Maker and
Payee submits to the jurisdiction of any state or federal court sitting in
Illinois and any action or proceeding arising out of or relating to this Note
and agrees that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
party with respect thereto. Any party may make service on any other party by
sending or delivering a copy of the process (1) to the party to be served at the
address and in the manner provided for the giving of notices in Section 5(b)
above. Nothing in this Section 5(d), however, shall affect the right of any
party to bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any other manner
permitted by law or in equity. Each party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or in equity.
(e) Parties in Interest. This Note shall bind the Maker and its
successors and assigns. This Note shall not be assigned or transferred by the
Payee without the express prior written consent of the Maker, except by will or,
in default thereof, by operation of law.
(f) Section Headings, Construction. The headings of Sections in this
Note are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Note unless otherwise specified.
(g) Gender. All words used in this Note will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the words "hereof" and "hereunder" and similar references refer to
this Note in its entirety and not to any specific section or subsection hereof.
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IN WITNESS WHEREOF, the Maker has executed and delivered this Note as
of the date first stated above.
THE MAKER:
EIF HOLDINGS, INC.
By: ____________________________
Frank J. Fradella, President
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Schedule A
CONVERSION NOTICE
To EIF Holdings, Inc.:
The undersigned payee of the within Note hereby irrevocably* exercises
the option to convert the principal payment in the amount of ______________
Dollars ($__________) that is due to the undersigned pursuant to the within Note
on ____________, ______ into the number of Conversion Stock determined by
dividing the above designated principal amount by the Conversion Price in
accordance with the terms of the within Note, and directs that the shares
issuable and deliverable upon the conversion, together with any check in payment
for fractional shares, be issued in the name of and delivered to the undersigned
payee.
Dated:__________________________
-----------------------------------
John L. Manta, as Trustee of Zachary Manta Trust
* The word irrevocably may be deleted in any notice given for any
exercise of Payee's conversion rights in connection with a public offering as
described in Section 3(a)(iii) of the Note.
g:\common\corp\notes\manta3.doc
Page 164
CONVERTIBLE PROMISSORY NOTE
The Securities evidenced hereby have not been registered under the Securities
Act of 1933, as amended, and cannot be sold unless they are registered under
said Act. EIF Holdings, Inc. has issued stop transfer instructions with respect
thereto in order to effectuate the foregoing restrictions.
No: A-8
$53,274.46 November 18, 1997
FOR VALUE RECEIVED, EIF Holdings, Inc., a Hawaii corporation (the
"Maker"), promises to pay to the order of Allan DeLange, an individual residing
at 13811 Cog Hill Lane, Orland Park, Illinois 60462 (the "Payee"), in lawful
money of the United States of America, the principal sum of Fifty Three
Thousand, Two Hundred and Seventy Four and 46/100 Dollars ($53,274.46), without
interest, in the manner provided below.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of a certain Stock Purchase Agreement, dated
September 30, 1997, by and between, inter alia, the Maker, as "Buyer," and the
Payee, as one of the "Sellers," (the "Stock Purchase Agreement"), whereby the
Maker has agreed to purchase all of the issued and outstanding capital stock of
J.L. Manta, Inc., an Illinois corporation ("Manta"). Contemporaneously with the
execution and delivery of this Note to Payee, Maker is also executing and
delivering a Convertible Promissory Note (in the same form and substance as this
Note, other than the principal amount) to each of the other "Sellers" under the
Stock Purchase Agreement (collectively, the "Other Notes"). This Note and the
Other Notes are being executed by Maker and delivered to Payee and the other
"Sellers" as partial payment of the purchase price to Sellers for the Shares
under the Stock Purchase Agreement. Contemporaneously with the execution and
delivery of this Note to Payee, Maker is also delivering a guaranty of this Note
(the "Guaranty") by American Eco Corporation (the "Guarantor"). This Agreement
is subject to the terms and conditions of the Stock Purchase Agreement, which
are, by this reference, incorporated herein and made a part hereof. Capitalized
terms used in this Note without definition shall have the respective meanings
set forth in the Stock Purchase Agreement.
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<PAGE>
1. Payments
(a) Principal Payments. Subject to the other provisions of this Section
1 and the provisions of Section 2 below, the principal amount of this Note shall
be due and payable in accordance with the following payment schedule until all
amounts hereunder have been paid in full:
November 18, 1998 $17,758.14
February 18, 1999 $4,439.54
May 18, 1999 $4,439.54
August 18, 1999 $4,439.54
November 18, 1999 $4,439.54
February 18, 2000 $4,439.54
May 18, 2000 $4,439.54
August 18, 2000 $4,439.54
November 18, 2000 $4,439.54
All payments of principal on this Note shall be made to the Payee at
his address set forth above or at such other place in the United States of
America as the Payee shall designate to the Maker in writing. If any payment of
principal on this Note is due on a day which is not a business day, such payment
shall be due on the next succeeding business day. "Business day" means any day
other than a Saturday, Sunday or legal holiday in the State of Illinois.
(b) Optional Prepayments. The Maker may, without premium or penalty, at
any time and from time to time, prepay all or any portion of the outstanding
principal balance due under this Note. Any partial prepayments shall be applied
to installments of principal in inverse order of their maturity.
(c) Right of Recoupment. The Maker shall, in accordance with Section
8(g) of the Stock Purchase Agreement have the option of recouping all or any
part of any Adverse Consequences it may suffer, to the extent Maker is entitled
to indemnity therefor under Section 8 of the Stock Purchase Agreement, by
notifying the Payee that the Maker is reducing the principal amount outstanding
under this Note. Any such recoupment by Maker shall be made subject to and in
accordance with all of the terms and conditions set forth in Section 8(g) of the
Stock Purchase Agreement and any payments required to be made by the Maker under
Section 8(g) of the Stock Purchase Agreement shall be deemed to be a payment
obligation under this Note. Such reduction shall affect the timing and amount of
payments required under this Note in the same manner as if the Maker had made a
permitted prepayment (without premium or penalty) hereunder.
(d) Interest on Late Payments. Interest on any payment of principal
required hereunder which is not made on the due date for such payment shall
accrue at the Applicable Rate (as defined in the Stock Purchase Agreement) from
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<PAGE>
the due date for such payment until the date on which such payment is made. Any
interest due hereunder shall be paid at the same time as the principal payment
is made.
2. Defaults
(a) Events of Default. The occurrence of any one or more of the
following events with respect to the Maker shall constitute an event of default
hereunder ("Event of Default"):
(i) If the Maker shall fail to pay when due the full amount of
any payment of principal or interest on this Note or any of the Other Notes and
such failure continues for five (5) days after the Payee notifies the Maker
thereof in writing; provided, however, that the exercise by the Maker in good
faith (and in accordance with the terms and conditions of Section 8 of the Stock
Purchase Agreement) of its right to withhold payment (or portion thereof) during
the pendency of any arbitration proceeding pursuant to the provisions of Section
8(g) of the Stock Purchase Agreement, whether or not ultimately recoupment is
determined to be justified, shall not constitute an Event of Default.
(ii) The occurrence of an Event of Default under any of the
Other Notes.
(iii) If, pursuant to or within the meaning of the United
States Bankruptcy Code or any other federal or state law relating to insolvency
or relief of debtors (a "Bankruptcy Law"), any of the Maker, Guarantor or Manta
shall (1) commence a voluntary case or proceeding; (2) consent to the entry of
an order for relief against it in an involuntary case; (3) consent to the
appointment of a trustee, receiver, assignee, liquidator or similar official;
(4) make an assignment for the benefit of its creditors; or (5) admit in writing
its inability to pay its debts as they become due.
(iv) The occurrence of a default pursuant to Section 2 of the
Retention Bonus Agreement (as defined in the Stock Purchase Agreement) entered
into between the Maker, Manta and the Payee.
(v) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (1) is for relief against any of the Maker,
Guarantor or Manta in an involuntary case, (2) appoints a trustee, receiver,
assignee, liquidator or similar official for any of the Maker, Guarantor or
Manta or any substantial part of any of the Maker's properties, Guarantor's
properties, or Manta's properties, or (3) orders the liquidation of any of the
Maker, Guarantor or Manta; and in each case the order or decree is not dismissed
within ninety (90) days.
(b) Remedies. Upon the occurrence of an Event of Default hereunder
(unless all Events of Default have been cured by the Maker or waived by the
Payee or the holders of the Other Notes), the holders of Notes representing more
than fifty (50%) percent of the then outstanding principal balance under this
Note and all of the Other Notes (the "Requisite Holders") may, at their option,
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<PAGE>
(i) declare the entire unpaid principal balance of this Note and the Other Notes
immediately due and payable regardless of any prior forbearance, (ii) exercise
any and all rights and remedies available to them under applicable law,
including, without limitation, the right to collect from the Maker all sums due
under this Note and the Other Notes, and, (iii) exercise any and all other
rights and remedies available to them at law or in equity. Notwithstanding the
foregoing, upon the occurrence of an Event of Default in connection with a
bankruptcy pursuant to Section 2(a)(iii) or Section 2(a)(v) above, the unpaid
principal amount of, and any and all accrued and unpaid interest on the Note and
any and all accrued and unpaid fees hereunder shall automatically become
immediately due and payable, without presentation, demand, or protest or other
requirements of any kind, all of which are hereby expressly waived by Maker. The
Maker shall pay all reasonable costs and expenses incurred by or on behalf of
the Payee and the holders of the Other Notes in connection with their exercise
of any or all of their rights and remedies under this Note and the Other Notes,
including, without limitation, reasonable attorney's fees. Notwithstanding the
foregoing, the Payee, acting alone, and without the consent or approval of the
Requisite Holders, may, upon the occurrence of an Event of Default as provided
for in Section 2(a)(i) (specifically excluding any Event of Default which shall
result from an Event of Default under any of the Other Notes), exercise and
pursue the foregoing remedies with respect to this Note.
3. Conversion.
(a) Conversion Procedures.
(i) The Payee is entitled, in lieu of receiving any principal
amount due hereunder (whether pursuant to an optional prepayment or by reason of
the occurrence of an Event of Default), to convert all or any portion of the
amount of any such principal payment into a number of shares of the no par value
common stock of Maker (the "Conversion Stock") determined by dividing the
principal amount designated by the Payee to be converted in the Conversion
Notice (as defined hereinbelow) by the Conversion Price (as defined
hereinbelow). The Payee shall exercise its conversion rights hereunder by
delivering to the Maker an executed conversion notice (the "Conversion Notice")
in the form of Schedule A attached hereto not less than thirty (30) days prior
to the scheduled due date of the principal payment to which it relates, or in
the case of any prepayment of principal by Maker or the acceleration of
principal payments upon an Event of Default, at any time prior to the acceptance
by Payee of such principal payment, but in such case, in no event later than ten
(10) days after the date upon which Payee received notice of such event.
(ii) Each such conversion of this Note shall be deemed to have
been affected as of the close of business on the scheduled due date for (or, in
the case of an optional prepayment or of acceleration of principal payments upon
an Event of Default, acceptance of) the principal payment in respect of which
such conversion is being made. At such time that such conversion has been
affected, the Payee shall be deemed to have become the holder of record of the
shares of Conversion Stock represented hereby.
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<PAGE>
(iii) Notwithstanding any other provision hereof other than
Section 3(c) below, if a conversion of any portion of this Note is to be made in
connection with a public offering, the conversion of any portion of this Note
may, at the election of Payee, be conditioned upon the consummation of the
public offering in which case such conversion shall not be deemed to be
effective until the consummation of the public offering; provided, however, that
any failure of Maker to make a principal payment as required herein due to such
conditional exercise of the Payee's conversion rights shall in no event be
deemed to constitute an Event of Default nor shall Payee be entitled to any
interest or penalties upon said principal payment or to exercise any of Payee's
rights and remedies hereunder until and unless the Maker has failed to pay the
amount of such principal payment within twenty (20) days after written notice
from the Payee withdrawing the exercise of such conversion rights.
(iv) As soon as possible after conversion has been affected
(but in any event within five (5) business days after conversion has been
affected), the Maker shall deliver to the converting Payee a certificate or
certificates representing the number of shares of Conversion Stock issuable by
reason of such conversion in the name of the Payee.
(v) The issuance of certificates of shares of Conversion Stock
upon conversion of this Note shall be made without charge to the Payee. Upon
conversion of this Note, the Maker shall take all such actions as necessary in
order to ensure that the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid, and non-assessable.
(vi) The Maker shall not close its books against the transfer
of Conversion Stock issued or issuable upon conversion of this Note in any
manner which interferes with the timely conversion of this Note. The Maker shall
assist and cooperate with the Payee with respect to any requirement to make any
governmental filings or obtain any governmental approval prior to or in
connection with the conversion of this Note (including, without limitation,
making any filings required to be made by the Maker).
(vii) All shares of Conversion Stock which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens, and charges. The Maker shall take all such actions
as may be reasonably necessary to assure that all such shares of Conversion
Stock may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
shares of Conversion Stock may be listed (except for official notice of issuance
which shall be immediately delivered by the Company upon each such issuance).
(viii) Principal Payments may not be converted in whole or in
part into increments of less than One Thousand (1000) shares of no par value
Common Stock of the Maker in each instance.
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(b) Conversion Price.
(i) The initial conversion price (the "Conversion Price")
shall be the closing transaction price of Maker's common stock on the date the
Conversion Notice has been received by Maker, with such closing price as
reported on the OTC bulletin board by Bloomberg Business Services. In the event
of the occurrence of any of the following events on or after the original date
of issuance of this Note (A) the Maker shall subdivide its outstanding shares of
no par value Common Stock (the "Common Stock") into a greater number of shares
of Common Stock (including, without limitation, by way of a forward stock
split), (B) the Maker shall combine its outstanding shares of Common Stock into
a smaller number of shares of Common Stock (including, without limitation, by
way of a reverse stock split) or (C) any other recapitalization or any merger,
consolidation, combination or other extraordinary corporate event with respect
to the Maker, the Conversion Price in effect immediately prior thereto and
Payee's Conversion rights hereunder shall be adjusted retroactively as provided
below so that if thereafter Payee shall exercise his conversion rights with
respect to any future principal payment, the Payee shall be entitled to receive
the number and kind of shares of the capital stock of Maker as he would have
owned or have been entitled to receive after the happening of any of the events
described in (A) or (B) above, had he exercised his conversion right immediately
prior to the happening of such event. Any adjustment made to the Conversion
Price pursuant to this Section shall become effective immediately after the
effective date of the subdivision or combination of shares of Common Stock. Such
adjustments shall be made successively whenever any event listed above shall
occur. All calculations under this Section shall be made to the nearest cent.
(ii) Whenever the Conversion Price is adjusted, as herein
provided, the Maker shall promptly cause its independent auditors to provide the
Payee with a certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment (the "Adjustment Certificate").
(c) Additional Limitations on Conversion. Notwithstanding any provision
contained herein to the contrary, Holder shall not be entitled to exercise any
of the conversion rights set forth in this Section 3 prior to the earlier of:
(i) the date the Amendment (as defined in the Stock Purchase Agreement) is
approved by the Maker's stockholders; or (ii) June 30, 1998, and Maker shall not
have any obligations hereunder in respect of any exercise by Employee of any
conversion rights in contravention of this Section 3(c) nor shall Maker be
obligated to provide any of the Alternative Compensation Agreements (as defined
in the Stock Purchase Agreement) with respect thereto; provided that the
foregoing shall not prohibit Payee from exercising such conversion rights with
respect to any outstanding payments which remain due and owing as of the date
set forth above.
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4. Subordination.
(a) "Senior Debt" of Maker as the date of any determination thereof
shall mean (i) all principal, interest and other amounts payable by the Buyer to
Deere Park Capital Management, Inc. (or its affiliates) or any other entity
providing financing to the Maker on or prior to the Closing Date (as defined in
the Stock Purchase Agreement) solely in connection with the Stock Purchase
Agreement and the other Buyer's Transaction Documents (as defined in the Stock
Purchase Agreement) (the "Acquisition Debt") and any modification, extension,
renewal or refinancing of the outstanding principal amount of the Acquisition
Debt, and (ii) if applicable, all principal, interest and other amounts payable
by Manta to Harris Bank under the existing credit facility from Harris Bank to
Manta for the purpose of providing working capital to Manta (the "Harris Debt")
and any modification, extension, renewal or refinancing of the outstanding
principal amount of the Harris Debt to the extent that Maker or Manta assumes or
refinances any of the Harris Debt, and any credit facility secured by Maker or
Manta to replace the Harris Debt.
(b) This note is subordinate and junior in right of payment and
performance, to the extent and the manner set forth herein, to the Senior Debt.
The Senior Debt shall continue to be Senior Debt and entitled to the benefits of
these subordination provisions irrespective of any amendment, modification or
waiver of any term of the Senior Debt (including, but not limited to,
modifications of interest rates and payment terms) in each case in accordance
with the limitations set forth in the definition of Senior Debt. If the Senior
Lender (as hereinafter defined) gives Maker and Payee a written notice ("Default
Notice") which (i) states that one or more events of default (as hereinafter
defined) has occurred and is continuing and (ii) instructs Maker to cease making
payments and Payee to cease accepting and receiving payments, of amounts due
under this Note, then, subject to clause (d) below, unless and until such event
of default shall have been cured or waived or shall have ceased to exist, Maker
will not make and Payee will not ask for, demand, sue for, take or receive from
Maker any direct or indirect payment (in cash, property or otherwise) on account
of the principal of, or premium, if any, or interest on this Note, during any
period after written notice of such default shall be given to Maker by a holder
of any Senior Debt. In the event of: (i) any insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or other
similar proceeding relating to Maker, or to its property, (ii) any proceedings
for liquidation, dissolution or other winding up of Maker, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by Maker for the benefit of creditors, or (iv) any other
marshaling of the assets of Maker, all Senior Debt (including any interest
thereon accruing after the commencement of any such proceedings and any
additional interest that would have accrued thereon but for the commencement of
such proceedings) shall first be paid in full before any payment or
distribution, whether in cash or other property, shall be made to Payee on
account of this Note. Notwithstanding any provision contained in this Note so
long as Senior Lender has not sent Maker and Payee a Default Notice, Maker shall
pay Payee and Payee may receive, accept and apply, the payments provided for
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herein on this Note as and when the same become due, whether by acceleration or
otherwise. For purposes of this Section 4, the term "event of default" shall
mean any event of default, as defined in the loan documents, note, guaranty or
any other agreement, instrument or document under which the Senior Debt is now
or hereafter outstanding (each hereinafter referred to as "Senior Loan
Document," which term shall include any modifications, amendments, extensions,
renewals or replacements thereof in accordance with the limitations set forth in
the definition of Senior Debt) such that the holders thereof may accelerate the
maturity thereof. The term "Senior Lender" shall mean and include the obligee or
other holder of any of the obligations included in the meaning of "Senior Debt,"
including, but not limited to, Deere Park Capital Management, Inc. (or its
affiliates) and its successors and assigns. If any payment or distribution,
whether in cash, securities or other property, shall be received by Payee in
contravention of any of the terms hereof before all the Senior Debt shall have
been paid in full, and a Default Notice shall have preceded such payment or
distribution, such payment or distribution shall be received in trust for the
benefit of, and shall be paid over and delivered and transferred to the holders
of the Senior Debt for application to the payment of all Senior Debt remaining
unpaid, to the extent necessary to pay all such Senior Debt in full, and
thereupon, such payment shall not be deemed to have been received by Payee as a
payment or payments under this Note. In the event of the failure of Payee to
endorse or assign any such payment or distribution, the holder of the Senior
Debt is hereby irrevocably authorized to endorse or assign the same. No present
or future holder of the Senior Debt shall be prejudiced in the right to enforce
subordination of this Note by any act or failure to act on the part of Maker.
(c) The foregoing provisions as to subordination are solely for the
purpose of defining the relative rights of the holders of the Senior Debt, on
the one hand, and Payee, on the other hand. Nothing contained herein shall
impair, as between Maker and Payee, the obligation of Maker, which is
unconditional and absolute, to pay to Payee the principal hereof and any
interest thereon, as and when the same shall become due and payable in
accordance with the terms hereof, or prevent Payee from exercising all rights,
powers and remedies otherwise permitted by applicable law or hereunder upon a
default hereunder, all subject to the rights of the holders of the Senior Debt
to receive cash or other property otherwise payable or deliverable to Payee.
Payee shall take such action (including, without limitation, consent to the
filing of a financing statement with respect thereto) as may, in the opinion of
any holder of Senior Debt at the time outstanding, be necessary or appropriate
to assure the effectiveness of the subordination effected by these provisions.
(d) Notwithstanding anything herein to the contrary, Payee may
accelerate this Note and commence enforcement actions with respect thereto, or
otherwise receive and accept payments under this Note, if a Default Notice has
been given to Maker or Payee by Senior Lender and (1) within 180 days from the
date of such Default Notice, the event or events of default are not waived by
the Senior Lender, eliminated as a result of an amendment or modification of the
Senior Loan Documents or cured, or (2) the Senior Lender accelerates its Senior
Debt and commences enforcement actions with respect thereto or the collateral
therefor. In the event that the Senior Lender has sent Maker and Payee a Default
Notice, Payee shall have no right (except as expressly provided herein) to
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accelerate, enforce any claim with respect to this Note or otherwise take any
action against Maker or Maker's property without the prior written consent of
Senior Lenders, until such time as the Senior Debt has been paid in full and
Senior Lenders have no obligation to make further advances to Maker. Further,
notwithstanding anything hereunder the contrary, subject to the foregoing
restrictions upon acceleration, Payee may pursue any and all rights and remedies
which Payee may have against the Guarantor under the Guaranty, and nothing
herein shall in any manner be deemed to alter or effect Payee's rights or
remedies with respect to said Guarantor.
(e) Maker hereby covenants and agrees to send to Payee, immediately
upon receipt by Maker, any notice of acceleration or commencement of enforcement
actions received by Maker from the Senior Lender.
(f) Each Default Notice shall be deemed to have been given by Senior
Lender to Maker or Payee when delivered in person to such party at the party's
address listed in the Stock Purchase Agreement or when deposited in the United
States mail, first class postage pre-paid or, in the case of telegraphic notice
or overnight courier services, one business day after delivered to the
telegraphic company or overnight courier service with payment provided for, or
in the case of telex or telecopy notice, when sent, verification received, in
each case addressed to Maker or Payee at the respective addresses listed in the
Stock Purchase Agreement or at such other address as either party may designate
by notice to the other in accordance with this paragraph.
5. Miscellaneous.
(a) Amendments and Waivers. Except as otherwise expressly provided
herein, the provisions of this Note and the Other Notes may be amended and the
Maker may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Maker has obtained the written
consent of the holders of more than fifty (50%) percent of the outstanding
principal amount of this Note and the Other Notes; provided that no such action
shall change (i) the rate at which or the manner in which interest accrues on
this Note or the Other Notes or the times at which such interest becomes
payable, (ii) any provision relating to the scheduled payments or prepayments of
principal on this Note or the Other Notes, or (iii) except as provided in
Section 3(b) above, the Conversion Price of this Note or the Other Notes or the
number of shares or the class of stock into which the Notes are convertible,
without the written consent of the holders of at least seventy-five (75%)
percent of the outstanding principal amount of this Note and the Other Notes.
The rights and remedies of the Payee under this Note shall be cumulative and not
alternative. Neither the failure nor any delay in exercising any right, power or
privilege under this Note or any of the Other Notes will operate as a waiver of
such right, power or privilege and no single or partial exercise of any such
right, power or privilege by the Payee will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege. The Maker hereby waives presentment, demand, protest and
notice of dishonor and protest.
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(b) Notices. Any notice required or permitted to be given hereunder
shall be given in accordance with Section 11(h) of the Stock Purchase Agreement.
(c) Severability. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Note will remain in full force and effect. Any provision of this Note held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
(d) Governing Law and Jurisdiction. This Note shall be governed by and
in accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law, provision or rule (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois. Each of the Maker and
Payee submits to the jurisdiction of any state or federal court sitting in
Illinois and any action or proceeding arising out of or relating to this Note
and agrees that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
party with respect thereto. Any party may make service on any other party by
sending or delivering a copy of the process (1) to the party to be served at the
address and in the manner provided for the giving of notices in Section 5(b)
above. Nothing in this Section 5(d), however, shall affect the right of any
party to bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any other manner
permitted by law or in equity. Each party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or in equity.
(e) Parties in Interest. This Note shall bind the Maker and its
successors and assigns. This Note shall not be assigned or transferred by the
Payee without the express prior written consent of the Maker, except by will or,
in default thereof, by operation of law.
(f) Section Headings, Construction. The headings of Sections in this
Note are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Note unless otherwise specified.
(g) Gender. All words used in this Note will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the words "hereof" and "hereunder" and similar references refer to
this Note in its entirety and not to any specific section or subsection hereof.
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IN WITNESS WHEREOF, the Maker has executed and delivered this Note as
of the date first stated above.
THE MAKER:
EIF HOLDINGS, INC.
By: ____________________________
Frank J. Fradella, President
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Schedule A
CONVERSION NOTICE
To EIF Holdings, Inc.:
The undersigned payee of the within Note hereby irrevocably* exercises
the option to convert the principal payment in the amount of ______________
Dollars ($__________) that is due to the undersigned pursuant to the within Note
on ____________, ______ into the number of Conversion Stock determined by
dividing the above designated principal amount by the Conversion Price in
accordance with the terms of the within Note, and directs that the shares
issuable and deliverable upon the conversion, together with any check in payment
for fractional shares, be issued in the name of and delivered to the undersigned
payee.
Dated:__________________________
-----------------------------------
Allan DeLange
* The word irrevocably may be deleted in any notice given for any
exercise of Payee's conversion rights in connection with a public offering as
described in Section 3(a)(iii) of the Note.
g:\common\corp\notes\delange.doc
Page 176
CONVERTIBLE PROMISSORY NOTE
The Securities evidenced hereby have not been registered under the Securities
Act of 1933, as amended, and cannot be sold unless they are registered under
said Act. EIF Holdings, Inc. has issued stop transfer instructions with respect
thereto in order to effectuate the foregoing restrictions.
No: A-9
$28,616.00 November 18, 1997
FOR VALUE RECEIVED, EIF Holdings, Inc., a Hawaii corporation (the
"Maker"), promises to pay to the order of Jon S. Claypool, an individual
residing at 311 22nd Street, Huntington, California 92648 (the "Payee"), in
lawful money of the United States of America, the principal sum of Twenty Eight
Thousand, Six Hundred and Sixteen Dollars ($28,616.00), without interest, in the
manner provided below.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of a certain Stock Purchase Agreement, dated
September 30, 1997, by and between, inter alia, the Maker, as "Buyer," and the
Payee, as one of the "Sellers," (the "Stock Purchase Agreement"), whereby the
Maker has agreed to purchase all of the issued and outstanding capital stock of
J.L. Manta, Inc., an Illinois corporation ("Manta"). Contemporaneously with the
execution and delivery of this Note to Payee, Maker is also executing and
delivering a Convertible Promissory Note (in the same form and substance as this
Note, other than the principal amount) to each of the other "Sellers" under the
Stock Purchase Agreement (collectively, the "Other Notes"). This Note and the
Other Notes are being executed by Maker and delivered to Payee and the other
"Sellers" as partial payment of the purchase price to Sellers for the Shares
under the Stock Purchase Agreement. Contemporaneously with the execution and
delivery of this Note to Payee, Maker is also delivering a guaranty of this Note
(the "Guaranty") by American Eco Corporation (the "Guarantor"). This Agreement
is subject to the terms and conditions of the Stock Purchase Agreement, which
are, by this reference, incorporated herein and made a part hereof. Capitalized
terms used in this Note without definition shall have the respective meanings
set forth in the Stock Purchase Agreement.
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1. Payments
(a) Principal Payments. Subject to the other provisions of this Section
1 and the provisions of Section 2 below, the principal amount of this Note shall
be due and payable in accordance with the following payment schedule until all
amounts hereunder have been paid in full:
November 18, 1998 $9,538.64
February 18, 1999 $2,384.67
May 18, 1999 $2,384.67
August 18, 1999 $2,384.67
November 18, 1999 $2,384.67
February 18, 2000 $2,384.67
May 18, 2000 $2,384.67
August 18, 2000 $2,384.67
November 18, 2000 $2,384.67
All payments of principal on this Note shall be made to the Payee at
his address set forth above or at such other place in the United States of
America as the Payee shall designate to the Maker in writing. If any payment of
principal on this Note is due on a day which is not a business day, such payment
shall be due on the next succeeding business day. "Business day" means any day
other than a Saturday, Sunday or legal holiday in the State of Illinois.
(b) Optional Prepayments. The Maker may, without premium or penalty, at
any time and from time to time, prepay all or any portion of the outstanding
principal balance due under this Note. Any partial prepayments shall be applied
to installments of principal in inverse order of their maturity.
(c) Right of Recoupment. The Maker shall, in accordance with Section
8(g) of the Stock Purchase Agreement have the option of recouping all or any
part of any Adverse Consequences it may suffer, to the extent Maker is entitled
to indemnity therefor under Section 8 of the Stock Purchase Agreement, by
notifying the Payee that the Maker is reducing the principal amount outstanding
under this Note. Any such recoupment by Maker shall be made subject to and in
accordance with all of the terms and conditions set forth in Section 8(g) of the
Stock Purchase Agreement and any payments required to be made by the Maker under
Section 8(g) of the Stock Purchase Agreement shall be deemed to be a payment
obligation under this Note. Such reduction shall affect the timing and amount of
payments required under this Note in the same manner as if the Maker had made a
permitted prepayment (without premium or penalty) hereunder.
(d) Interest on Late Payments. Interest on any payment of principal
required hereunder which is not made on the due date for such payment shall
accrue at the Applicable Rate (as defined in the Stock Purchase Agreement) from
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the due date for such payment until the date on which such payment is made. Any
interest due hereunder shall be paid at the same time as the principal payment
is made.
2. Defaults
(a) Events of Default. The occurrence of any one or more of the
following events with respect to the Maker shall constitute an event of default
hereunder ("Event of Default"):
(i) If the Maker shall fail to pay when due the full amount of
any payment of principal or interest on this Note or any of the Other Notes and
such failure continues for five (5) days after the Payee notifies the Maker
thereof in writing; provided, however, that the exercise by the Maker in good
faith (and in accordance with the terms and conditions of Section 8 of the Stock
Purchase Agreement) of its right to withhold payment (or portion thereof) during
the pendency of any arbitration proceeding pursuant to the provisions of Section
8(g) of the Stock Purchase Agreement, whether or not ultimately recoupment is
determined to be justified, shall not constitute an Event of Default.
(ii) The occurrence of an Event of Default under any of the
Other Notes.
(iii) If, pursuant to or within the meaning of the United
States Bankruptcy Code or any other federal or state law relating to insolvency
or relief of debtors (a "Bankruptcy Law"), any of the Maker, Guarantor or Manta
shall (1) commence a voluntary case or proceeding; (2) consent to the entry of
an order for relief against it in an involuntary case; (3) consent to the
appointment of a trustee, receiver, assignee, liquidator or similar official;
(4) make an assignment for the benefit of its creditors; or (5) admit in writing
its inability to pay its debts as they become due.
(iv) The occurrence of a default pursuant to Section 2 of the
Retention Bonus Agreement (as defined in the Stock Purchase Agreement) entered
into between the Maker, Manta and the Payee.
(v) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (1) is for relief against any of the Maker,
Guarantor or Manta in an involuntary case, (2) appoints a trustee, receiver,
assignee, liquidator or similar official for any of the Maker, Guarantor or
Manta or any substantial part of any of the Maker's properties, Guarantor's
properties, or Manta's properties, or (3) orders the liquidation of any of the
Maker, Guarantor or Manta; and in each case the order or decree is not dismissed
within ninety (90) days.
(b) Remedies. Upon the occurrence of an Event of Default hereunder
(unless all Events of Default have been cured by the Maker or waived by the
Payee or the holders of the Other Notes), the holders of Notes representing more
than fifty (50%) percent of the then outstanding principal balance under this
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Note and all of the Other Notes (the "Requisite Holders") may, at their option,
(i) declare the entire unpaid principal balance of this Note and the Other Notes
immediately due and payable regardless of any prior forbearance, (ii) exercise
any and all rights and remedies available to them under applicable law,
including, without limitation, the right to collect from the Maker all sums due
under this Note and the Other Notes, and, (iii) exercise any and all other
rights and remedies available to them at law or in equity. Notwithstanding the
foregoing, upon the occurrence of an Event of Default in connection with a
bankruptcy pursuant to Section 2(a)(iii) or Section 2(a)(v) above, the unpaid
principal amount of, and any and all accrued and unpaid interest on the Note and
any and all accrued and unpaid fees hereunder shall automatically become
immediately due and payable, without presentation, demand, or protest or other
requirements of any kind, all of which are hereby expressly waived by Maker. The
Maker shall pay all reasonable costs and expenses incurred by or on behalf of
the Payee and the holders of the Other Notes in connection with their exercise
of any or all of their rights and remedies under this Note and the Other Notes,
including, without limitation, reasonable attorney's fees. Notwithstanding the
foregoing, the Payee, acting alone, and without the consent or approval of the
Requisite Holders, may, upon the occurrence of an Event of Default as provided
for in Section 2(a)(i) (specifically excluding any Event of Default which shall
result from an Event of Default under any of the Other Notes), exercise and
pursue the foregoing remedies with respect to this Note.
3. Conversion.
(a) Conversion Procedures.
(i) The Payee is entitled, in lieu of receiving any principal
amount due hereunder (whether pursuant to an optional prepayment or by reason of
the occurrence of an Event of Default), to convert all or any portion of the
amount of any such principal payment into a number of shares of the no par value
common stock of Maker (the "Conversion Stock") determined by dividing the
principal amount designated by the Payee to be converted in the Conversion
Notice (as defined hereinbelow) by the Conversion Price (as defined
hereinbelow). The Payee shall exercise its conversion rights hereunder by
delivering to the Maker an executed conversion notice (the "Conversion Notice")
in the form of Schedule A attached hereto not less than thirty (30) days prior
to the scheduled due date of the principal payment to which it relates, or in
the case of any prepayment of principal by Maker or the acceleration of
principal payments upon an Event of Default, at any time prior to the acceptance
by Payee of such principal payment, but in such case, in no event later than ten
(10) days after the date upon which Payee received notice of such event.
(ii) Each such conversion of this Note shall be deemed to have
been affected as of the close of business on the scheduled due date for (or, in
the case of an optional prepayment or of acceleration of principal payments upon
an Event of Default, acceptance of) the principal payment in respect of which
such conversion is being made. At such time that such conversion has been
affected, the Payee shall be deemed to have become the holder of record of the
shares of Conversion Stock represented hereby.
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(iii) Notwithstanding any other provision hereof other than
Section 3(c) below, if a conversion of any portion of this Note is to be made in
connection with a public offering, the conversion of any portion of this Note
may, at the election of Payee, be conditioned upon the consummation of the
public offering in which case such conversion shall not be deemed to be
effective until the consummation of the public offering; provided, however, that
any failure of Maker to make a principal payment as required herein due to such
conditional exercise of the Payee's conversion rights shall in no event be
deemed to constitute an Event of Default nor shall Payee be entitled to any
interest or penalties upon said principal payment or to exercise any of Payee's
rights and remedies hereunder until and unless the Maker has failed to pay the
amount of such principal payment within twenty (20) days after written notice
from the Payee withdrawing the exercise of such conversion rights.
(iv) As soon as possible after conversion has been affected
(but in any event within five (5) business days after conversion has been
affected), the Maker shall deliver to the converting Payee a certificate or
certificates representing the number of shares of Conversion Stock issuable by
reason of such conversion in the name of the Payee.
(v) The issuance of certificates of shares of Conversion Stock
upon conversion of this Note shall be made without charge to the Payee. Upon
conversion of this Note, the Maker shall take all such actions as necessary in
order to ensure that the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid, and non-assessable.
(vi) The Maker shall not close its books against the transfer
of Conversion Stock issued or issuable upon conversion of this Note in any
manner which interferes with the timely conversion of this Note. The Maker shall
assist and cooperate with the Payee with respect to any requirement to make any
governmental filings or obtain any governmental approval prior to or in
connection with the conversion of this Note (including, without limitation,
making any filings required to be made by the Maker).
(vii) All shares of Conversion Stock which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens, and charges. The Maker shall take all such actions
as may be reasonably necessary to assure that all such shares of Conversion
Stock may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
shares of Conversion Stock may be listed (except for official notice of issuance
which shall be immediately delivered by the Company upon each such issuance).
(viii) Principal Payments may not be converted in whole or in
part into increments of less than One Thousand (1000) shares of no par value
Common Stock of the Maker in each instance.
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(b) Conversion Price.
(i) The initial conversion price (the "Conversion Price")
shall be the closing transaction price of Maker's common stock on the date the
Conversion Notice has been received by Maker, with such closing price as
reported on the OTC bulletin board by Bloomberg Business Services. In the event
of the occurrence of any of the following events on or after the original date
of issuance of this Note (A) the Maker shall subdivide its outstanding shares of
no par value Common Stock (the "Common Stock") into a greater number of shares
of Common Stock (including, without limitation, by way of a forward stock
split), (B) the Maker shall combine its outstanding shares of Common Stock into
a smaller number of shares of Common Stock (including, without limitation, by
way of a reverse stock split) or (C) any other recapitalization or any merger,
consolidation, combination or other extraordinary corporate event with respect
to the Maker, the Conversion Price in effect immediately prior thereto and
Payee's Conversion rights hereunder shall be adjusted retroactively as provided
below so that if thereafter Payee shall exercise his conversion rights with
respect to any future principal payment, the Payee shall be entitled to receive
the number and kind of shares of the capital stock of Maker as he would have
owned or have been entitled to receive after the happening of any of the events
described in (A) or (B) above, had he exercised his conversion right immediately
prior to the happening of such event. Any adjustment made to the Conversion
Price pursuant to this Section shall become effective immediately after the
effective date of the subdivision or combination of shares of Common Stock. Such
adjustments shall be made successively whenever any event listed above shall
occur. All calculations under this Section shall be made to the nearest cent.
(ii) Whenever the Conversion Price is adjusted, as herein
provided, the Maker shall promptly cause its independent auditors to provide the
Payee with a certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment (the "Adjustment Certificate").
(c) Additional Limitations on Conversion. Notwithstanding any provision
contained herein to the contrary, Holder shall not be entitled to exercise any
of the conversion rights set forth in this Section 3 prior to the earlier of:
(i) the date the Amendment (as defined in the Stock Purchase Agreement) is
approved by the Maker's stockholders; or (ii) June 30, 1998, and Maker shall not
have any obligations hereunder in respect of any exercise by Employee of any
conversion rights in contravention of this Section 3(c) nor shall Maker be
obligated to provide any of the Alternative Compensation Agreements (as defined
in the Stock Purchase Agreement) with respect thereto; provided that the
foregoing shall not prohibit Payee from exercising such conversion rights with
respect to any outstanding payments which remain due and owing as of the date
set forth above.
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4. Subordination.
(a) "Senior Debt" of Maker as the date of any determination thereof
shall mean (i) all principal, interest and other amounts payable by the Buyer to
Deere Park Capital Management, Inc. (or its affiliates) or any other entity
providing financing to the Maker on or prior to the Closing Date (as defined in
the Stock Purchase Agreement) solely in connection with the Stock Purchase
Agreement and the other Buyer's Transaction Documents (as defined in the Stock
Purchase Agreement) (the "Acquisition Debt") and any modification, extension,
renewal or refinancing of the outstanding principal amount of the Acquisition
Debt, and (ii) if applicable, all principal, interest and other amounts payable
by Manta to Harris Bank under the existing credit facility from Harris Bank to
Manta for the purpose of providing working capital to Manta (the "Harris Debt")
and any modification, extension, renewal or refinancing of the outstanding
principal amount of the Harris Debt to the extent that Maker or Manta assumes or
refinances any of the Harris Debt, and any credit facility secured by Maker or
Manta to replace the Harris Debt.
(b) This note is subordinate and junior in right of payment and
performance, to the extent and the manner set forth herein, to the Senior Debt.
The Senior Debt shall continue to be Senior Debt and entitled to the benefits of
these subordination provisions irrespective of any amendment, modification or
waiver of any term of the Senior Debt (including, but not limited to,
modifications of interest rates and payment terms) in each case in accordance
with the limitations set forth in the definition of Senior Debt. If the Senior
Lender (as hereinafter defined) gives Maker and Payee a written notice ("Default
Notice") which (i) states that one or more events of default (as hereinafter
defined) has occurred and is continuing and (ii) instructs Maker to cease making
payments and Payee to cease accepting and receiving payments, of amounts due
under this Note, then, subject to clause (d) below, unless and until such event
of default shall have been cured or waived or shall have ceased to exist, Maker
will not make and Payee will not ask for, demand, sue for, take or receive from
Maker any direct or indirect payment (in cash, property or otherwise) on account
of the principal of, or premium, if any, or interest on this Note, during any
period after written notice of such default shall be given to Maker by a holder
of any Senior Debt. In the event of: (i) any insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or other
similar proceeding relating to Maker, or to its property, (ii) any proceedings
for liquidation, dissolution or other winding up of Maker, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by Maker for the benefit of creditors, or (iv) any other
marshaling of the assets of Maker, all Senior Debt (including any interest
thereon accruing after the commencement of any such proceedings and any
additional interest that would have accrued thereon but for the commencement of
such proceedings) shall first be paid in full before any payment or
distribution, whether in cash or other property, shall be made to Payee on
account of this Note. Notwithstanding any provision contained in this Note so
long as Senior Lender has not sent Maker and Payee a Default Notice, Maker shall
pay Payee and Payee may receive, accept and apply, the payments provided for
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herein on this Note as and when the same become due, whether by acceleration or
otherwise. For purposes of this Section 4, the term "event of default" shall
mean any event of default, as defined in the loan documents, note, guaranty or
any other agreement, instrument or document under which the Senior Debt is now
or hereafter outstanding (each hereinafter referred to as "Senior Loan
Document," which term shall include any modifications, amendments, extensions,
renewals or replacements thereof in accordance with the limitations set forth in
the definition of Senior Debt) such that the holders thereof may accelerate the
maturity thereof. The term "Senior Lender" shall mean and include the obligee or
other holder of any of the obligations included in the meaning of "Senior Debt,"
including, but not limited to, Deere Park Capital Management, Inc. (or its
affiliates) and its successors and assigns. If any payment or distribution,
whether in cash, securities or other property, shall be received by Payee in
contravention of any of the terms hereof before all the Senior Debt shall have
been paid in full, and a Default Notice shall have preceded such payment or
distribution, such payment or distribution shall be received in trust for the
benefit of, and shall be paid over and delivered and transferred to the holders
of the Senior Debt for application to the payment of all Senior Debt remaining
unpaid, to the extent necessary to pay all such Senior Debt in full, and
thereupon, such payment shall not be deemed to have been received by Payee as a
payment or payments under this Note. In the event of the failure of Payee to
endorse or assign any such payment or distribution, the holder of the Senior
Debt is hereby irrevocably authorized to endorse or assign the same. No present
or future holder of the Senior Debt shall be prejudiced in the right to enforce
subordination of this Note by any act or failure to act on the part of Maker.
(c) The foregoing provisions as to subordination are solely for the
purpose of defining the relative rights of the holders of the Senior Debt, on
the one hand, and Payee, on the other hand. Nothing contained herein shall
impair, as between Maker and Payee, the obligation of Maker, which is
unconditional and absolute, to pay to Payee the principal hereof and any
interest thereon, as and when the same shall become due and payable in
accordance with the terms hereof, or prevent Payee from exercising all rights,
powers and remedies otherwise permitted by applicable law or hereunder upon a
default hereunder, all subject to the rights of the holders of the Senior Debt
to receive cash or other property otherwise payable or deliverable to Payee.
Payee shall take such action (including, without limitation, consent to the
filing of a financing statement with respect thereto) as may, in the opinion of
any holder of Senior Debt at the time outstanding, be necessary or appropriate
to assure the effectiveness of the subordination effected by these provisions.
(d) Notwithstanding anything herein to the contrary, Payee may
accelerate this Note and commence enforcement actions with respect thereto, or
otherwise receive and accept payments under this Note, if a Default Notice has
been given to Maker or Payee by Senior Lender and (1) within 180 days from the
date of such Default Notice, the event or events of default are not waived by
the Senior Lender, eliminated as a result of an amendment or modification of the
Senior Loan Documents or cured, or (2) the Senior Lender accelerates its Senior
Debt and commences enforcement actions with respect thereto or the collateral
therefor. In the event that the Senior Lender has sent Maker and Payee a Default
Notice, Payee shall have no right (except as expressly provided herein) to
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accelerate, enforce any claim with respect to this Note or otherwise take any
action against Maker or Maker's property without the prior written consent of
Senior Lenders, until such time as the Senior Debt has been paid in full and
Senior Lenders have no obligation to make further advances to Maker. Further,
notwithstanding anything hereunder the contrary, subject to the foregoing
restrictions upon acceleration, Payee may pursue any and all rights and remedies
which Payee may have against the Guarantor under the Guaranty, and nothing
herein shall in any manner be deemed to alter or effect Payee's rights or
remedies with respect to said Guarantor.
(e) Maker hereby covenants and agrees to send to Payee, immediately
upon receipt by Maker, any notice of acceleration or commencement of enforcement
actions received by Maker from the Senior Lender.
(f) Each Default Notice shall be deemed to have been given by Senior
Lender to Maker or Payee when delivered in person to such party at the party's
address listed in the Stock Purchase Agreement or when deposited in the United
States mail, first class postage pre-paid or, in the case of telegraphic notice
or overnight courier services, one business day after delivered to the
telegraphic company or overnight courier service with payment provided for, or
in the case of telex or telecopy notice, when sent, verification received, in
each case addressed to Maker or Payee at the respective addresses listed in the
Stock Purchase Agreement or at such other address as either party may designate
by notice to the other in accordance with this paragraph.
5. Miscellaneous.
(a) Amendments and Waivers. Except as otherwise expressly provided
herein, the provisions of this Note and the Other Notes may be amended and the
Maker may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Maker has obtained the written
consent of the holders of more than fifty (50%) percent of the outstanding
principal amount of this Note and the Other Notes; provided that no such action
shall change (i) the rate at which or the manner in which interest accrues on
this Note or the Other Notes or the times at which such interest becomes
payable, (ii) any provision relating to the scheduled payments or prepayments of
principal on this Note or the Other Notes, or (iii) except as provided in
Section 3(b) above, the Conversion Price of this Note or the Other Notes or the
number of shares or the class of stock into which the Notes are convertible,
without the written consent of the holders of at least seventy-five (75%)
percent of the outstanding principal amount of this Note and the Other Notes.
The rights and remedies of the Payee under this Note shall be cumulative and not
alternative. Neither the failure nor any delay in exercising any right, power or
privilege under this Note or any of the Other Notes will operate as a waiver of
such right, power or privilege and no single or partial exercise of any such
right, power or privilege by the Payee will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege. The Maker hereby waives presentment, demand, protest and
notice of dishonor and protest.
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(b) Notices. Any notice required or permitted to be given hereunder
shall be given in accordance with Section 11(h) of the Stock Purchase Agreement.
(c) Severability. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Note will remain in full force and effect. Any provision of this Note held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
(d) Governing Law and Jurisdiction. This Note shall be governed by and
in accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law, provision or rule (whether of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois. Each of the Maker and
Payee submits to the jurisdiction of any state or federal court sitting in
Illinois and any action or proceeding arising out of or relating to this Note
and agrees that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
party with respect thereto. Any party may make service on any other party by
sending or delivering a copy of the process (1) to the party to be served at the
address and in the manner provided for the giving of notices in Section 5(b)
above. Nothing in this Section 5(d), however, shall affect the right of any
party to bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any other manner
permitted by law or in equity. Each party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or in equity.
(e) Parties in Interest. This Note shall bind the Maker and its
successors and assigns. This Note shall not be assigned or transferred by the
Payee without the express prior written consent of the Maker, except by will or,
in default thereof, by operation of law.
(f) Section Headings, Construction. The headings of Sections in this
Note are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Note unless otherwise specified.
(g) Gender. All words used in this Note will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the words "hereof" and "hereunder" and similar references refer to
this Note in its entirety and not to any specific section or subsection hereof.
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IN WITNESS WHEREOF, the Maker has executed and delivered this Note as
of the date first stated above.
THE MAKER:
EIF HOLDINGS, INC.
By: ____________________________
Frank J. Fradella, President
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Schedule A
CONVERSION NOTICE
To EIF Holdings, Inc.:
The undersigned payee of the within Note hereby irrevocably* exercises
the option to convert the principal payment in the amount of ______________
Dollars ($__________) that is due to the undersigned pursuant to the within Note
on ____________, ______ into the number of Conversion Stock determined by
dividing the above designated principal amount by the Conversion Price in
accordance with the terms of the within Note, and directs that the shares
issuable and deliverable upon the conversion, together with any check in payment
for fractional shares, be issued in the name of and delivered to the undersigned
payee.
Dated:__________________________
-----------------------------------
Jon S. Claypool
* The word irrevocably may be deleted in any notice given for any
exercise of Payee's conversion rights in connection with a public offering as
described in Section 3(a)(iii) of the Note.
g:\common\corp\notes\claypool.doc
Page 188
PLEDGE AGREEMENT
PLEDGE AGREEMENT made the 18th day of November, 1997 (the "Agreement")
among EIF Holdings, Inc. (hereinafter referred to as "Pledgor"), Deere Park
Capital Management, Inc. (hereinafter referred to as "Pledgee") and Deere Park
Equities, L.L.C. (hereinafter referred to as "Custodian").
WHEREAS, in connection with the Stock Purchase Agreement, Pledgee has
loaned the sum of Two Million, Five Hundred Thousand Dollars ($2,500,000.00) to
Pledgor, as evidenced by a Promissory Note in such amount issued by Pledgor to
Pledgee on the date hereof (the "Note");
WHEREAS, the payment of the Note and certain other amounts due
thereunder, as referenced in the Note (with such amounts, together with the Note
referred to hereinafter collectively as the "Indebtedness") is intended to be
secured by the pledge to the Pledgee of the Manta Shares and certain shares held
in the name of the Pledgor during the period when the Indebtedness remains
unpaid.
NOW, THEREFORE, for good and valuable consideration, the parties hereto
agree as follows:
1. Pledgor hereby deposits with the Custodian certificates representing
Four Hundred Seventy Five Thousand (475,000) shares of American Eco Corporation,
fully registered and freely tradeable on the NASDAQ, free of any restrictions or
covenants (the "Shares"). The Custodian acknowledges that it is currently in
possession of the Shares and shall hold said certificates as custodian under the
terms, provisions, and conditions of this Agreement. The Shares and stock powers
described in this Paragraph 1 shall be collectively called the "Custodial
Documents". The Shares are collateral security during the term hereof for the
benefit of Pledgee to secure payment of the Indebtedness.
2. All voting rights incident to the Shares shall be vested in Pledgor
until the occurrence of an Event of Default as defined in Paragraph 4 below and
Pledgee has notified the Custodian to deliver the Shares pursuant to Paragraph 5
hereof.
3. Pledgor covenants and agrees that until the Indebtedness is
completely paid or otherwise satisfied, and except in the event Pledgee consents
otherwise in writing, Pledgor will take such action as may be necessary to
maintain and renew the Company's corporate existence.
4. Upon the expiration of fifteen (15) days after written notice from
Pledgee, the occurrence of any one or more of the following events shall be an
event of default ("Event of Default") hereunder if it remains uncured after the
expiration of such fifteen (15) day period:
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(a)The failure of Pledgor to pay any sum when due and payable under
the Note;
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Pledgor shall (1) commence a voluntary
case or proceeding; (2) consent to the entry of an order for relief against it
in an involuntary case; (3) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; (4) make an assignment for the benefit
of its creditors; or (5) admit in writing its inability to pay its debts as they
become due.
(c) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (1) is for relief against Pledgor in an
involuntary case; (2) appoints a trustee, receiver, assignee, liquidator or
similar official for Pledgor or any substantial part of any of Pledgor's
properties; or (3) orders the liquidation of Pledgor and the order or decree is
not dismissed within ninety (90) days.
(d) The occurrence of any other event of default of Pledgor,
as provided in the Note.
5. In the event that an Event of Default as provided in Paragraph 4 has
occurred and is continuing for fifteen (15) days after Pledgor's receipt of
written notice of such default, then promptly (and in no event more than five
(5) business days) after notice to the Custodian from or on behalf of Pledgee
(with proof that a copy of such notice has been received by Pledgor or by
certified mail, return receipt requested) of the occurrence of an Event of
Default which has continued for more than fifteen (15) days, the Custodian shall
deliver to Pledgor (a) the Shares, and (b) all stock transfer powers on deposit
with Custodian pursuant to Paragraph 1 hereof. In such event, Pledgee may
proceed to protect or enforce the following rights in any order, which rights
shall be cumulative and not exclusive:
(a) Pledgee may effect the transfer of the Shares into its own
name or that of a nominee of Pledgee; all voting rights pertaining to the Shares
may be immediately exercised by Pledgee, without any additional acts on the part
of Pledgee. This Agreement shall in such event constitute a proxy coupled with
an interest which shall be irrevocable by the Pledgor.
(b) Pledgee may proceed to protect and enforce its rights by a
suit or suits in equity or at law, to enforce any covenant or agreement herein,
or to enjoin any violation of any term, provision or condition hereof, or in
execution or aid of any power herein granted, or to sue for and recover judgment
for the whole amount due Pledgee by any action or actions or suit or suits in
law or equity as the Pledgee may deem advisable.
Page 190
<PAGE>
(c) Pledgee may, by written notice to Pledgor, designate a time not
earlier than twenty (20) days after the giving of such notice to Pledgor and at
a place in the State of Illinois, for the sale of the Shares; and Pledgee may
(acting in a commercially reasonable manner) at such time and place sell the
Shares at public or private sale, as a unit or in smaller blocks, for such price
and upon such terms and conditions as Pledgee may reasonably determine. After
first deducting the costs of sale, Pledgee shall apply any balance of the sale
proceeds to the payment of the Obligations. Pledgor shall, in any event, remain
liable for any deficiency after such sale. In exercising its rights hereunder
this Paragraph 5, to the extent that it is determined that the value of the
Shares exceeds the then outstanding Obligations, Pledgee shall be responsible to
Pledgor for such excess value.
(d) If Pledgor shall, as a result of its ownership of the
Shares, become entitled to receive or shall receive any stock certificate or
other certificate or instrument, option or rights, in substitution of, as a
conversion of, or in exchange for any of the Shares or otherwise in respect
thereof, Pledgor shall accept the same as Pledgee's agent, hold the same in
trust for Pledgee and deliver the same forthwith to Pledgee in the exact form
received, together with a duly executed undated stock power or other transfer
document covering such certificate or instrument, to be held by Pledgee
hereunder as additional collateral security for the Obligations.
(e) The Custodian shall have no responsibility to determine
whether a default has occurred, it being Pledgee's obligation to notify
Custodian and Pledgor that an Event of Default has occurred. Custodian may rely
upon Pledgee's representation that an Event of Default has occurred.
6. In addition to and not in limitation of the foregoing, Pledgee shall
have all rights of a secured party under the Uniform Commercial Code of the
State of Illinois (the "UCC"). Pledgor retains its rights under the UCC, to the
extent such rights are not in conflict with the terms of this Agreement.
7. Each of the parties hereto agrees to waive any and all restrictions
on transfer set forth in the Company's Articles of Incorporation in connection
with the pledge of the Shares pursuant to this Agreement.
8. In acting as Custodian hereunder, Custodian: (a) shall have no
duties or obligations other than those specifically set forth herein, said
duties being purely ministerial in nature; (b) shall be regarded as making no
representations and having no responsibilities as to the validity, sufficiency,
value or genuineness of this Agreement or the security created thereby or any
Custodial Documents or other items deposited with it hereunder; and (c) may rely
on and shall be protected in acting upon or refraining from acting upon any
certificate, written instruction, instrument, opinion, notice, letter or any
other document delivered to it and reasonably believed by it to be genuine and
to have been signed by the proper party or parties.
Page 191
<PAGE>
Neither Custodian nor any of its directors, officers or employees shall be
liable to anyone for any action taken or omitted to be taken by it or any of its
directors, officers or employees hereunder except in the case of negligence or
willful misconduct.
Custodian may at any time resign as custodian hereunder by giving not
less than thirty (30) days' prior written notice of resignation to Pledgor and
Pledgee. Prior to the effective date of resignation as specified in such notice,
Pledgee will issue to Custodian a written instruction, authorizing redelivery to
such person or persons as Pledgee and Pledgor shall designate, of all of the
Custodial Documents then held by Custodian.
9. Custodian shall be prohibited from holding the Shares to secure any
obligation between Pledgor and the Custodian.
10. If and when Pledgor shall pay, satisfy, or otherwise discharge the
whole amount of the Indebtedness, and such payment, satisfaction or discharge
has been confirmed in writing by Pledgee, then Pledgor will promptly notify the
Custodian that this Agreement has become null and void, and upon such notice to
Custodian from Pledgor that this Agreement has so become null and void, the
Custodian shall forthwith deliver to Pledgor the Shares and said stock transfer
powers.
11. Notwithstanding any provision to the contrary set forth in this
Agreement, Pledgor shall be entitled to sell certain of the Shares from time to
time during the term of this Agreement, and such Shares shall be released from
this Agreement, provided that at the time of such release the fair market value
of the Shares remaining pledged pursuant to the terms of this Agreement is not
less than Two Million, Five Hundred Thousand ($2,500,000.00) Dollars. In the
event that Pledgor has elected to sell the Shares pursuant to this Section,
Pledgor shall so notify the Custodian and state the number of Shares to be
released (the "Released Shares"), and the Custodian shall forthwith deliver the
Released Shares to Pledgor.
12. No course of dealing between Pledgee and Pledgor shall operate as a
waiver of any right, except to the extent expressly waived in writing by
Pledgee. No waiver of any provision hereof or right hereunder by any party in
any particular instance shall constitute a waiver of any provision hereof or
right hereunder in connection with any other instance.
13. All notices, requests, demands, claims, and other communications
hereunder shall be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the notice recipient, with copies
to such party's counsel, as set forth below:
Page 192
<PAGE>
If to the Pledgee:
Deere Park Capital Management, Inc. Copy to: Stephen N. Engberg, Esq.
650 Dundee Road, Suite 460 Stephen Engberg &
Northbrook, IL 60062 Associates, P.C.
333 W. Wacker Drive
Suite 2020
Chicago, IL 60606
Fax: (312) 606-0106
If to the Pledgor:
Frank J. Fradella Copy to: Aaron A. Gilman, Esq.
President & CEO Devine, Millimet &
EIF Holdings, Inc. Branch, Professional
616 FM 1960 West, Suite 630 Association
Houston, TX 77090 12 Essex Street
Fax: 281-537-9668 P.O. Box 39
Andover, MA 01810
Fax 978-470-0618
If to Custodian:
Deere Park Equities, L.L.C. Copy to: Stephen N. Engberg, Esq.
650 Dundee Road, Suite 460 Stephen Engberg &
Northbrook, IL 60062 Associates, P.C.
333 W. Wacker Drive
Suite 2020
Chicago, IL 60606
Fax: (312) 606-0106
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address and/or the notice recipient to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
14. The rights created by this Agreement shall inure to the benefit of,
and the obligations created hereby shall be binding upon, the respective
successors and assigns of the parties hereto.
15. This Agreement and any rights or obligations hereunder may not be
assigned by either Pledgee or Pledgor.
EXECUTED in one or more counterparts, each of which shall constitute an
original hereof, to be governed by the laws of the State of Illinois on the date
first above written.
Page 193
<PAGE>
PLEDGOR: PLEDGEE:
EIF HOLDINGS, INC. DEERE PARK CAPITAL
MANAGEMENT, INC.
By: _____________________________ By:
Name: Name:
Title: Title:
CUSTODIAN:
DEERE PARK EQUITIES, L.L.C.
By:
Name:
Title:
g:\common\corp\agreemnt\pledgeif.cls
Page 194
SECURITY AGREEMENT
The undersigned, organized and duly existing under the laws of the
State of Illinois with a mailing address at 5233 Hohman Avenue, Hammond, Indiana
46320 (hereinafter called "DEBTOR") for valuable consideration, receipt whereof
is hereby acknowledged, hereby grants to DEERE PARK CAPITAL MANAGEMENT, INC.,
the secured party hereunder (hereinafter called "LENDER"), a security interest
in Equipment, whether now owned or existing or hereafter created, acquired or
arising, or in which the DEBTOR now has or hereafter acquires any rights (the
term "Equipment" means and includes all equipment and any other machinery,
tools, fixtures, trade fixtures, furniture, furnishings, office equipment,
vehicles (including vehicles subject to a certificate of title law), and all
other goods now or hereafter used or usable in connection with the DEBTOR's
business, together with all parts, accessories and attachments relating to any
of the foregoing (all of which items or property are hereinafter referred to as
the "Collateral"), to secure the payment of any and all liabilities of EIF
Holdings, Inc., the parent company of DEBTOR ("EIF"), to LENDER, now existing or
hereafter arising, pursuant to a Note by EIF to LENDER dated the date hereof, in
the original principal amount of Two Million, Five Hundred Thousand
($2,500,000.00) Dollars (the "Note"), with such security interest being granted
as an inducement and accommodation to EIF to make a loan to DEBTOR in the
principal amount of Two Million, Five Hundred Thousand ($2,500,000.00) Dollars,
it being the intention of the parties hereto that this instrument shall
constitute a security agreement within the meaning of the Uniform Commercial
Code with respect to so much of the Collateral as may be considered for the
benefit of the LENDER to secure the indebtedness evidenced by the Note and
secured by this Agreement, and all other sums and charges which may become due
hereunder or thereunder (collectively, the "Obligations"). The security interest
held by the LENDER shall cover cash and non-cash proceeds of the Collateral, but
nothing contained herein shall be construed as prohibiting, either expressly or
by implication, the sale or other disposition of the Collateral by the DEBTOR in
the ordinary course of business.
The DEBTOR covenants and agrees that, as of the execution hereof and
upon the subsequent acquisition of such Collateral now or hereafter, the DEBTOR
shall:
(a) execute and deliver to the LENDER, in the form appropriate for
recording and filing, financing statements on all such Collateral;
(b) provide to the LENDER such other assurances as may be required by
the LENDER to establish the LENDER's security interest in such Collateral; and
(c) execute, deliver and cause to be recorded and filed from time to
time, upon reasonable notice and request, and at the DEBTOR's sole cost and
expense, continuances and such other instruments as will maintain the LENDER's
security in such Collateral.
The DEBTOR warrants and represents that all Collateral now is, and that
all replacements thereof, substitutions therefor or additions thereto will be,
free and clear of liens, encumbrances or security interests of others, except
for Permitted Encumbrances.
Page 195
<PAGE>
For purposes of this Agreement, the term "Permitted Encumbrances" means (i)
liens for taxes, assessments and other governmental charges not yet due and
payable, or being contested in good faith by permissible proceedings; (ii)
customary retention of title provisions contained in contracts with suppliers
for purchase of goods or equipment entered into in the ordinary course of
business pending payment for such goods or equipment in accordance with
customary payment terms; (iii) mechanics', warehousemen's, landlords' and other
similar statutory liens incurred in the ordinary course of business; (iv)
easements, rights-of-way, covenants, conditions and other restrictions which do
not materially interfere with the present use, occupancy or operation of any
real property; (v) roads and highways, spurs and switch tracts, and
rights-of-way of any railroad serving any real property; (vi) planning, zoning,
business and other similar governmental regulations; (vii) unrecorded easements
or rights-of-way for any utilities providing utility services to any real
property; (viii) encroachments which do not materially interfere with the use,
occupancy or operation of any real property and which are disclosed on the
survey delivered with respect to each property listed on Schedule 4(l) attached
hereto (the "Survey"); (ix) all matters disclosed on the Survey; and (x) those
encumbrances referenced in Schedule 4(c) and 4(l) attached hereto and made a
part hereof.
DEBTOR hereby warrants and covenants to LENDER as follows:
1. That except for the security interest granted hereby and the
Permitted Encumbrances, DEBTOR is, or to the extent that this Agreement states
that the Collateral is to be acquired after the date hereof, will be the owner
of the Collateral free from any adverse lien, security interest, or other
encumbrance.
2. That the Collateral is not used or bought primarily for personal,
family or household purposes.
3. That, except as set forth below in Section 5, the Collateral will be
kept at the address as listed above; that DEBTOR will promptly notify LENDER of
any change in the location of the Collateral within said State; and that, except
as set forth below in Section 5, DEBTOR will not remove the Collateral from said
State without the written consent of LENDER, such consent not to be unreasonably
withheld.
4. That if the Collateral has been attached or is to be attached to
real estate, a description of the real estate is as set forth on Schedule 4(l)
attached hereto.
5. That if the Collateral is of a type normally used in more than one
state (such as automotive equipment, rolling stock, airplanes, road building
equipment, commercial harvesting equipment, construction machinery and the like)
and DEBTOR has a place of business in more than one state, the chief place of
business of DEBTOR is that shown at the beginning of this Agreement and DEBTOR
will immediately notify LENDER in writing of any change in DEBTOR's chief place
of business.
6. Except for Permitted Encumbrances, no financing statement covering
any Collateral or any process thereof is on file in any public office, and that
at the request of LENDER, DEBTOR will join with LENDER in executing one or more
financing statements pursuant to the Uniform Commercial Code in form
satisfactory to LENDER and will pay the cost of filing the same in all public
offices wherever filing is reasonably deemed by LENDER to be necessary or
desirable.
Page 196
<PAGE>
7. That DEBTOR will not sell or offer to sell or otherwise transfer the
Collateral or any interest therein except in the ordinary course of business.
8. That DEBTOR will have and maintain or cause to have maintained
insurance at all times with respect to all Collateral against risks of fire
(including so-called extended coverage) and theft.
9. That except for the Permitted Encumbrances, the DEBTOR will keep the
Collateral free from any adverse lien, security interest or encumbrance and will
not waste or destroy the Collateral or any part thereof; and that LENDER may
examine and inspect the Collateral at any reasonable time, upon prior written
notice.
10. That DEBTOR will pay promptly when due all taxes and assessments
upon the Collateral, except for such taxes and assessments which are being
contested in good faith by DEBTOR.
11. At its option, LENDER may discharge taxes and assessments at any
time levied or placed on the Collateral, except for such taxes and assessments
which are being contested in good faith by DEBTOR. DEBTOR agrees to reimburse
LENDER on demand for any payment made by LENDER pursuant to the foregoing
authorization.
12. Until the declaration of an Event of Default (as defined below)
which remains uncured fifteen (15) days after DEBTOR's receipt of notice of such
default, DEBTOR may have possession of the Collateral and use it in any manner
not inconsistent with this Agreement.
13. The occurrence of any one or more of the following events shall
constitute an event of default hereunder ("Event of Default") if it remains
uncured fifteen (15) days after DEBTOR's receipt of notice of such default:
(a) The failure of DEBTOR to pay any sum when due and payable under
the Note;
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of DEBTORS (a "Bankruptcy Law"), the DEBTOR shall (1) commence a
voluntary case or proceeding; (2) consent to the entry of an order for relief
against it in an involuntary case; (3) consent to the appointment of a trustee,
receiver, assignee, liquidator or similar official; (4) make an assignment for
the benefit of its creditors; or (5) admit in writing its inability to pay its
debts as they become due.
Page 197
<PAGE>
(c) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (1) is for relief against DEBTOR in an
involuntary case; (2) appoints a trustee, receiver, assignee, liquidator or
similar official for the DEBTOR or any substantial part of any of DEBTOR's
properties; or (3) orders the liquidation of the DEBTOR and the order or decree
is not dismissed within ninety (90) days.
14. Upon such Event of Default, or at any time or times thereafter if
such Event of Default remains uncured, LENDER may declare all Obligations
secured hereby immediately due and payable and shall have the remedies of a
secured party under the Uniform Commercial Code and any options as heretofore
stated in this Agreement. LENDER may require DEBTOR to assemble the Collateral
and make it available to LENDER at a place to be designed by LENDER which is
reasonably convenient to both parties. Whenever notification with respect to the
sale or other disposition of the Collateral is required by law, such
notification of the time and place of public sale, or of the date after which a
private sale or of other intended disposition is to made, shall be deemed
reasonable if mailed, postage prepaid, addressed to DEBTOR and given at least
twenty (20) days before the time of such public sale or the date after which any
such private sale or other intended disposition is to be made, as the case may
be.
15. The rights created by this Agreement shall inure to the benefit of,
and the obligations created thereby shall be binding upon, the respective
successors and assigns of the parties hereto.
16. This Agreement and all rights and obligations hereunder, including
matters of construction, validity and performance, shall be governed by the laws
of the State of Illinois, to the jurisdiction of whose Courts the party hereto
submit.
17. All notices, requests, demands, claims, and other communications
hereunder shall be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the notice recipient, with copies
to such party's counsel, as set forth below:
Page 198
<PAGE>
<PAGE>
If to the LENDER:Deere Capital Management, Inc. Copy to: Sephen N. Engberg,Esq.
650 Dundee Road, Suite 460 Stephen Engberg &
Northbrook, IL 60062 Associates, P.C.
333 W. Wacker Drive
Suite 2020
Chicago, IL 60606
Fax: (312) 606-0106
If to the DEBTOR: Frank J. Fradella Copy to: Aaron A. Gilman, Esq.
President & CEO Devine, Millimet &
EIF Holdings, Inc . Branch, P.A.
616 FM 1960 West 12 Essex Street,
Suite 630 P.O. Box 39
Houston, TX 77090 Andover, MA 01810
Fax: 281-537-9668 Fax 978-470-0618
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth in this Section
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any party may change the address and/or the notice recipient to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
LENDER hereby warrants and covenants as follows:
1. That DEBTOR has acknowledged the existence and perfection of Harris
Trust and Savings Bank's ("Harris") first position security interest in and to
the Collateral, and that the LENDER's security interest in and to the Collateral
hereunder and pursuant to the Note shall be subordinated and junior to Harris'
security interest described herein pursuant to that certain Debt Subordination
Agreement, dated the date hereof, by and among the DEBTOR, Harris, EIF Holdings,
Inc., and LENDER and shall be subject to the Permitted Encumbrances.
Page 199
<PAGE>
<PAGE>
Signed, sealed and delivered on this 18th day of November, 1997.
J.L. MANTA, INC.
By:
Name:
Title:
ACCEPTED AND AGREED:
DEERE PARK CAPITAL MANAGEMENT, INC.
By:
Name:
Title:
g:\common\corp\agreemnt\deere.sec
Page 200
PLEDGE AGREEMENT
PLEDGE AGREEMENT made the 18th day of November, 1997 (the "Agreement")
among EIF Holdings, Inc. (hereinafter referred to as "Pledgor"), Deere Park
Capital Management, Inc., as nominee for EIFH Joint Venture, L.L.C. and certain
Reg. D Hedge Funds (hereinafter referred to as "Pledgee") and Deere Park
Equities, L.L.C. (hereinafter referred to as "Custodian").
WHEREAS, pursuant to a Stock Purchase Agreement, dated September 30,
1997 (the "Stock Purchase Agreement"), by and among Pledgor and the
stockholders of J.L. Manta, Inc. (the "Company"), Pledgor has agreed to
purchase all of the issued and outstanding stock of the Company (the "Manta
Shares");
WHEREAS, in connection with the Stock Purchase Agreement, Pledgee has
loaned the sum of Six Million, Five Hundred Thousand Dollars ($6,500,000.00) to
Pledgor, as evidenced by a Promissory Note in such amount issued by Pledgor to
Pledgee on the date hereof (the "Note");
WHEREAS, the payment of the Note and certain other amounts due
thereunder, as referenced in the Note (with such amounts, together with the Note
referred to hereinafter collectively as the "Indebtedness") is intended to be
secured by the pledge to the Pledgee of the Manta Shares and certain shares held
in the name of the Pledgor during the period when the Indebtedness remains
unpaid.
NOW, THEREFORE, for good and valuable consideration, the parties hereto
agree as follows:
1. Pledgor hereby deposits with the Custodian (i) certificates for all
of the Manta Shares with stock powers duly endorsed in blank for transfer and
(ii) certificates representing One Million (1,000,000) shares of Pledgor, fully
registered and freely tradeable, free of any restrictions or covenants (the "EIF
Shares"), with stock powers duly endorsed in blank for transfer. The Manta
Shares and the EIF Shares shall be collectively called the "Shares". The
Custodian shall hold said certificates as custodian under the terms, provisions,
and conditions of this Agreement. The Shares and stock powers described in this
Paragraph 1 shall be collectively called the "Custodial Documents". The Shares
are collateral security during the term hereof for the benefit of Pledgee to
secure payment of the Indebtedness.
2. All voting rights incident to the Shares shall be vested in Pledgor
until the occurrence of an Event of Default as defined in Paragraph 4 below and
Pledgee has notified the Custodian to deliver the Shares pursuant to Paragraph 5
hereof.
3. Pledgor covenants and agrees that until the Indebtedness is
completely paid or otherwise satisfied, and except in the event Pledgee consents
otherwise in writing, Pledgor will take such action as may be necessary to
maintain and renew the Company's corporate existence.
4. Upon the expiration of fifteen (15) days after written notice from
Pledgee, the occurrence of any one or more of the following events shall be an
event of default ("Event of Default") hereunder if it remains uncured after the
expiration of such fifteen (15) day period:
(a) The failure of Pledgor to pay any sum when due and payable under
the Note;
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Pledgor shall (1) commence a voluntary
case or proceeding; (2) consent to the entry of an order for relief against it
in an involuntary case; (3) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; (4) make an assignment for the benefit
of its creditors; or (5) admit in writing its inability to pay its debts as they
become due.
(c) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (1) is for relief against Pledgor in an
involuntary case; (2) appoints a trustee, receiver, assignee, liquidator or
similar official for Pledgor or any substantial part of any of Pledgor's
properties; or (3) orders the liquidation of Pledgor and the order or decree is
not dismissed within ninety (90) days.
(d) The occurrence of any other event of default of Pledgor,
as provided in the Note.
5. In the event that an Event of Default as provided in Paragraph 4 has
occurred and is continuing for fifteen (15) days after Pledgor's receipt of
written notice of such default, then promptly (and in no event more than five
(5) business days) after notice to the Custodian from or on behalf of Pledgee
(with proof that a copy of such notice has been received by Pledgor or by
certified mail, return receipt requested) of the occurrence of an Event of
Default which has continued for more than fifteen (15) days, the Custodian shall
deliver to Pledgor (a) the Shares, and (b) all stock transfer powers on deposit
with Custodian pursuant to Paragraph 1 hereof. In such event, Pledgee may
proceed to protect or enforce the following rights in any order, which rights
shall be cumulative and not exclusive:
(a) Pledgee may effect the transfer of the Shares into its own
name or that of a nominee of Pledgee; all voting rights pertaining to the Shares
may be immediately exercised by Pledgee, without any additional acts on the part
of Pledgee. This Agreement shall in such event constitute a proxy coupled with
an interest which shall be irrevocable by the Pledgor.
Page 201
<PAGE>
(b) Pledgee may proceed to protect and enforce its rights by a
suit or suits in equity or at law, to enforce any covenant or agreement herein,
or to enjoin any violation of any term, provision or condition hereof, or in
execution or aid of any power herein granted, or to sue for and recover judgment
for the whole amount due Pledgee by any action or actions or suit or suits in
law or equity as the Pledgee may deem advisable.
(c) Pledgee may, by written notice to Pledgor, designate a
time not earlier than twenty (20) days after the giving of such notice to
Pledgor and at a place in the State of Illinois, for the sale of the Shares; and
Pledgee may (acting in a commercially reasonable manner) at such time and place
sell the Shares at public or private sale, as a unit or in smaller blocks, for
such price and upon such terms and conditions as Pledgee may reasonably
determine. After first deducting the costs of sale, Pledgee shall apply any
balance of the sale proceeds to the payment of the Obligations. Pledgor shall,
in any event, remain liable for any deficiency after such sale. In exercising
its rights hereunder this Paragraph 5, to the extent that it is determined that
the value of the Shares exceeds the then outstanding Obligations, Pledgee shall
be responsible to Pledgor for such excess value.
(d) If Pledgor shall, as a result of its ownership of the
Shares, become entitled to receive or shall receive any stock certificate or
other certificate or instrument, option or rights, in substitution of, as a
conversion of, or in exchange for any of the Shares or otherwise in respect
thereof, Pledgor shall accept the same as Pledgee's agent, hold the same in
trust for Pledgee and deliver the same forthwith to Pledgee in the exact form
received, together with a duly executed undated stock power or other transfer
document covering such certificate or instrument, to be held by Pledgee
hereunder as additional collateral security for the Obligations.
(e) The Custodian shall have no responsibility to determine
whether a default has occurred, it being Pledgee's obligation to notify
Custodian and Pledgor that an Event of Default has occurred. Custodian may rely
upon Pledgee's representation that an Event of Default has occurred.
6. In addition to and not in limitation of the foregoing, Pledgee shall
have all rights of a secured party under the Uniform Commercial Code of the
State of Illinois (the "UCC"). Pledgor retains its rights under the UCC, to the
extent such rights are not in conflict with the terms of this Agreement.
7. Each of the parties hereto agrees to waive any and all restrictions
on transfer set forth in the Company's Articles of Incorporation in connection
with the pledge of the Shares pursuant to this Agreement.
8. In acting as Custodian hereunder, Custodian: (a) shall have no
duties or obligations other than those specifically set forth herein, said
duties being purely ministerial in nature; (b) shall be regarded as making no
representations and having no responsibilities as to the validity, sufficiency,
value or genuineness of this Agreement or the security created thereby or any
Custodial Documents or other items deposited with it hereunder; and (c) may rely
on and shall be protected in acting upon or refraining from acting upon any
certificate, written instruction, instrument, opinion, notice, letter or any
other document delivered to it and reasonably believed by it to be genuine and
to have been signed by the proper party or parties.
Neither Custodian nor any of its directors, officers or employees shall
be liable to anyone for any action taken or omitted to be taken by it or any of
its directors, officers or employees hereunder except in the case of negligence
or willful misconduct.
Custodian may at any time resign as custodian hereunder by giving not
less than thirty (30) days' prior written notice of resignation to Pledgor and
Pledgee. Prior to the effective date of resignation as specified in such notice,
Pledgee will issue to Custodian a written instruction, authorizing redelivery to
such person or persons as Pledgee and Pledgor shall designate, of all of the
Custodial Documents then held by Custodian.
9. Custodian shall be prohibited from holding the Shares to secure any
obligation between Pledgor and the Custodian.
10. If and when Pledgor shall pay, satisfy, or otherwise discharge the
whole amount of the Indebtedness, and such payment, satisfaction or discharge
has been confirmed in writing by Pledgee, then Pledgor will promptly notify the
Custodian that this Agreement has become null and void, and upon such notice to
Custodian from Pledgor that this Agreement has so become null and void, the
Custodian shall forthwith deliver to Pledgor the Shares and said stock transfer
powers.
11. No course of dealing between Pledgee and Pledgor shall operate as a
waiver of any right, except to the extent expressly waived in writing by
Pledgee. No waiver of any provision hereof or right hereunder by any party in
any particular instance shall constitute a waiver of any provision hereof or
right hereunder in connection with any other instance.
12. All notices, requests, demands, claims, and other communications
hereunder shall be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the notice recipient, with copies
to such party's counsel, as set forth below:
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<PAGE>
If to the Pledgee:
Deere Park Capital Management, Inc. Copy to: Stephen N. Engberg, Esq.
650 Dundee Road, Suite 460 Stephen Engberg &
Northbrook, IL 60062 Associates, P.C.
333 W. Wacker Drive
Suite 2020
Chicago, IL 60606
Fax: (312) 606-0106
If to the Pledgor: Frank J. Fradella Copy to: Aaron A. Gilman, Esq.
President & CEO Devine, Millimet &
EIF Holdings, Inc. Branch, Professional
616 FM 1960 West, Suite 630 Association
Houston, TX 77090 12 Essex Street
Fax: 281-537-9668 P.O. Box 39
Andover, MA 01810
Fax 978-470-0618
If to Custodian:Deere Park Equities, L.L.C. Copy to: Stephen N. Engberg, Esq.
650 Dundee Road, Suite 460 Stephen Engberg &
Northbrook, IL 60062 Associates, P.C.
333 W. Wacker Drive
Suite 2020
Chicago, IL 60606
Fax: (312) 606-0106
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address and/or the notice recipient to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
13. The rights created by this Agreement shall inure to the benefit of,
and the obligations created hereby shall be binding upon, the respective
successors and assigns of the parties hereto.
14. This Agreement and any rights or obligations hereunder may not be
assigned by either Pledgee or Pledgor.
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<PAGE>
EXECUTED in one or more counterparts, each of which shall constitute an
original hereof, to be governed by the laws of the State of Illinois on the date
first above written.
PLEDGOR: PLEDGEE:
EIF HOLDINGS, INC. DEERE PARK CAPITAL MANAGEMENT, INC.,
as nominee for EIFH Joint Venture, L.L.C.
and certain Reg. D. Hedge Funds
By: _____________________________ By:
Name: Name:
Title: Title:
CUSTODIAN:
DEERE PARK EQUITIES, L.L.C.
By:
Name:
Title:
g:\common\corp\agreemnt\pledge.eif
Page 205
REGISTRATION RIGHTS AGREEMENT
AMONG
EIF Holdings, Inc.
AND
Leo J. Manta
Steven A. Manta
Michael J. Chakos
John L. Manta
Allan DeLange
John L. Manta, as Trustee of
Zachary Manta Trust
John L. Manta, as Trustee of
Erica Manta Trust
John L. Manta, as Trustee of
Alexander Manta Trust
Leo G. Manta
Jon S. Claypool
November 18, 1997
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as of
November 18, 1997, by and among EIF Holdings, Inc., a Hawaii corporation
(the "Buyer"), and Leo J. Manta, Steven A. Manta, Michael J. Chakos, John
L. Manta, Allan DeLange, John L. Manta, as Trustee of Zachary Manta Trust,
John L. Manta, as Trustee of Erica Manta Trust, John L. Manta, as Trustee
of Alexander Manta Trust, Leo G. Manta, and Jon S. Claypool (collectively
the "Sellers").
Recitals
This Agreement has been executed and delivered pursuant to and in
accordance with the terms and conditions of a certain Stock Purchase Agreement,
dated September 30, 1997, by and among the Buyer and the Sellers (the "Stock
Purchase Agreement") pursuant to which and contemporaneously with the execution
hereof, Buyer is purchasing all of the issued and outstanding capital stock of
J.L. Manta, Inc., an Illinois corporation. Capitalized terms used in this
Agreement without definition shall have the respective meanings set forth in the
Stock Purchase Agreement.
The Buyer desires to grant certain registration rights to the Sellers
with respect to certain securities of the Buyer delivered to the Sellers in
consideration for, or otherwise in connection with, the transactions set forth
in or contemplated under either the Stock Purchase Agreement or any of the Buyer
Transaction Documents.
Agreement
Now, therefore, the parties hereto, intending to be legally bound,
mutually agree as follows:
1. Definitions. As used in this Agreement the following terms shall
have the following respective meanings:
"Additional Stock Option Agreements" means the additional Stock Option
Agreements to be delivered to Sellers pursuant to the Stock Purchase
Agreement.
"Convertible Securities" means the Convertible Promissory Notes,
Retention Bonus Agreements, Stock Option Agreements, and Additional Stock
Option Agreements.
"Convertible Promissory Notes" means the Convertible Promissory Notes
issued to the Sellers pursuant to the Stock Purchase Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holders" mean persons owning of record Registrable Securities and/or
Convertible Securities.
"Retention Bonus Agreements" means the Retention Bonus Agreements
executed and delivered pursuant to the Stock Purchase Agreement.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Registrable Securities" means the Shares; provided, however,
notwithstanding the foregoing, Registrable Securities shall not include any
Shares sold after the date hereof to the public either pursuant to a
registration statement or Rule 144 or sold in a private transaction, or
securities eligible for resale pursuant to Rule 144(k).
"Registration Expenses" shall mean all expenses incurred by the Buyer
in complying with Sections 2(a), 2(b) and 2(c) hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Buyer, blue sky fees and expenses and the
expense of any special audits incurred by the Buyer incident to or required by
any such registration.
"Requisite Holders" shall mean the Holders of a majority in interest
of the Shares.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"Shares" shall mean shares of the Buyer's common stock, no par value,
duly issuable to the Sellers upon the conversion of the Convertible Promissory
Notes, the conversion of the Retention Bonus Agreements or the exercise of
options granted pursuant to the terms of any of the Stock Option Agreements or
Additional Stock Option Agreements.
"Stock Option Agreements" means the Stock Option Agreements issued to
the Sellers pursuant to the Stock Purchase Agreement.
"Form S-3" means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"SEC" or "Commission" means the Securities and Exchange Commission.
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<PAGE>
2. Registration:
(a) Piggyback Registrations. The Company shall notify the Holders in
writing at least thirty (30) days prior to the filing of any registration
statement under the Securities Act for purposes of a public offering of
securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to employee benefit plans or with
respect to corporate reorganizations or other transactions under Rule 145 of the
Securities Act) and will afford the Holders an opportunity to include in such
registration statement all of the Registrable Securities then held by the
Holders or duly issuable to such Holders prior to the filing of the subject
registration statement with the SEC upon their exercise of any option or
conversion right under any Convertible Security (the "Converted Securities").
The Holders desiring to include in any such registration statement all or any
part of the Registrable Securities held by it or, Converted Securities to be
held by it, shall, within fifteen (15) days after the above-described notice
from the Company, so notify the Company in writing. Such notice shall state the
intended method of disposition of the Registrable Securities or Converted
Securities by the Holders. If the Holders decide not to include all of their
Registrable Securities or Converted Securities in any registration statement
thereafter filed by the Company, the Holders shall nevertheless continue to have
the right to include any Registrable Securities or Converted Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(1)......Underwriting. If the registration statement under
which the Company gives notice under this Section 2(a) is for an underwritten
offering, the Company shall so advise the Holders. In such event, the right of
the Holders to be included in a registration pursuant to this Section 2(a) shall
be conditioned upon the Holders' participation in such underwriting and the
inclusion of the Holders' Registrable Securities and Converted Securities in the
underwriting to the extent provided herein. The Holders shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to any shareholder of the
Company (other than the Holders) possessing rights entitling such shareholder to
have its shares of Common Stock registered on a pro rata basis; and third, to
the Holders. No such reduction shall reduce the securities being offered by the
Company for its own account to be included in the registration and underwriting.
(2)......Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 2(a) prior to the effectiveness of such registration whether or not
the Holders have elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by the
Company in accordance with Section 2(c) hereof.
(b) Form S-3 Registration. In the event that the Company receives from
the Requisite Holders a written request or requests that the Company effect a
registration on Form S-3 (or any successor to Form S-3) or any similar
short-form registration statement and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by the
Requisite Holders, then the Company will:
(1)......as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of the
Requisite Holders' Registrable Securities as are specified in such request;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2(b):
.........(i) if Form S-3 (or any successor or similar form) is not
available for such offering by such Requisite Holders, or
.........(ii) if such Requisite Holders, together with the holders of
any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public of less than
$1,000,000, or
.........(iii) if the Company shall furnish to the Requisite
Holders a certificate signed by the Chairman of the Board of Directors of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than one hundred twenty (120) days after
receipt of the request of the Requisite Holders under this Section 2(b);
provided, that such right to delay a request shall be exercised by the Company
not more than once in any twelve (12) month period, or
.........(iv) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected one (1) registration
on Form S-3 for any of the Holders pursuant to this Section 2(b), or
.........(v) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or
compliance.
(2)......Subject to the foregoing, the Company shall file a
Form S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request of the Requisite Holders. All such Registration Expenses incurred in
connection with registrations requested pursuant to this Section 2(b) after the
first registration shall be paid by the Holders participating in such
registration.
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<PAGE>
(c) Expenses of Registration. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration under
Section 2(a) hereinabove and the first registration, qualification or compliance
pursuant to any registration under Section 2(b) herein shall be borne by the
Company. All Selling Expenses incurred in connection with any registrations of
Registrable Shares hereunder shall be borne by the Holders. The Company shall
not, however, be required to pay for expenses of any registration proceeding
begun pursuant to Section 2(b), the request of which has been subsequently
withdrawn by the Holders unless the withdrawal is based upon material adverse
information concerning the Company of which the Holders were not aware at the
time of such request.
(d) Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(1)......Prepare and file with the SEC a registration
statement as required hereunder with respect to such Registrable Securities and
use all commercially reasonable efforts to cause such registration statement to
become effective.
(2)......Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(3)......Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities.
(4)......Use all commercially reasonable efforts to register
and qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such as shall be reasonably requested by
the Holders, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or Jurisdictions.
(5)......In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter(s) of such offering. The
Holders participating in such underwriting shall also enter into and perform
their obligations under such an agreement.
(6)......Notify the Holders of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(7)......Furnish, at the request of the Holders participating
in the registration, on the date that such Registrable Securities are delivered
to the underwriters for sale, if such securities are being sold through
underwriters, or, if such securities are not being sold through underwriters, on
the date that the registration statement with respect to such securities becomes
effective, (i) an opinion, dated as of such date, of the counsel representing
the Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (ii) a letter dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders requesting registration,
addressed to the underwriters, if any, and if permitted by applicable accounting
standards, to the Holders requesting registration of Registrable Securities.
(e) Termination of Registration Rights. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect four
(4) years after the date hereof.
(f) Delay of Registration; Furnishing Information.
(1)......The Holders shall not have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
(2)......It shall be a condition precedent to the obligations
of the Company to take any action pursuant to Section 2(a) or 2(b) that the
Holders furnish to the Company such information regarding themselves, the
Registrable Securities held by them, including the actual issuance of such
Registrable Securities and the intended method of disposition of such securities
as shall be required to effect the registration of the Registrable Securities.
(3)......The Company shall have no obligation with respect to
any registration requested pursuant to Section 2(a) or Section 2(b) if, due to
the operation of subsection 2(f)(2), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2(b).
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<PAGE>
(g) Indemnification. In the event any Registrable Securities are
included in a registration statement under Sections 2(a) or 2(b):
(1)......To the extent permitted by law, the Company will
indemnify and hold harmless the Holders and legal counsel of the Holders, any
underwriter (as defined in the Securities Act) for the Holders and each person,
if any, who controls such Holders or underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company or any of its affiliates, attorneys,
auditors, or other representatives: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will reimburse the
Holders, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided however, that the
indemnity agreement contained in this Section 2(g)(1) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld, nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holders, underwriter or controlling person of the
Holders.
(2)......To the extent permitted by law, the Holders will, if
Registrable Securities held by the Holders are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers,
and legal counsel and each person, if any, who controls the Company within the
meaning of the Securities Act, and any underwriter, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, legal counsel, controlling person, or underwriter may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that the Violation occurs in reliance upon
and in conformity with written information furnished by the Holders under an
instrument duly executed by the Holders and stated to be for use in connection
with such registration, and the Holders will reimburse any legal fees or other
expenses reasonably incurred by the Company or any such director, officer, legal
counsel, controlling person, or underwriter in connection with investigating or
defending any such loss, claim, damage, liability or action if it is judicially
determined that there was such a Violation; provided, however, that the
indemnity agreement contained in this Section 2(g)(2) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holders, which consent shall
not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2(g) exceed the proceeds from the offering received
by the Holders.
(3)......Promptly after receipt by an indemnified party under
this Section 2(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2(g), deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2(g), but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
2(g).
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<PAGE>
(4)......If the indemnification provided for in this Section
2(g) is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the Violation(s) that resulted
in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(5)......The obligations of the Company and the Holders under
this Section 2(g) shall survive completion of any offering of Registrable
Securities in a registration statement and the termination of this Agreement. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
(h) "Market Stand-Off" Agreement. If requested by the Company or the
representative of the underwriters of common stock (or other securities) of the
Company, the Holders shall not sell or otherwise transfer or dispose of any
Shares (or other securities) of the Company held by the Holders (other than
those included in the registration) for a period specified by the representative
of the underwriters not to exceed one hundred eighty (180) days following the
effective date of a registration statement of the Company filed under the
Securities Act, provided that all officers and directors of the Company shall
enter into similar agreements.
The obligations described in this Section 2(h) shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of common stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
(i) Amendment of Registration Rights. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Requisite Holders of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section
2(i) shall be binding upon the Holders and the Company. By acceptance of any
benefits under this Section 2, Holders of Registrable Securities hereby agree to
be bound by the provisions hereunder including, but not limited to, this
amendment provision.
(j) Rule 144 Reporting. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(1)......Make and keep public information available, as those
terms are understood and defined in SEC Rule 144 or any similar or analogous
rule promulgated under the Securities Act, at all times after the effective date
of the first registration filed by the Company for an offering of its securities
to the general public;
(2)......File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;
(3)......So long as the Holders own any Registrable
Securities, or any of the Convertible Securities remain outstanding, furnish to
such Holders forthwith upon request: a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 of the
Securities Act, and of the Exchange Act (at any time after it has become subject
to such reporting requirements); a copy of the most recent annual or quarterly
report of the Company; and such other reports and documents as the Holders may
reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.
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(k) Filing of SEC Reports. As promptly as possible following the
Closing Date of the Stock Purchase Agreement, but in all events no later than
March 31, 1998 (the "Filing Deadline Date"), the Company shall file all forms,
reports and documents that were required to be filed (but were not filed) by it
with the SEC and/or NASDAQ at any time prior to the Filing Deadline Date (the
("Delinquent SEC Reports"). From and after the Filing Deadline Date, and for so
long as this Agreement remains in effect, the Company shall timely file with the
SEC, NASDAQ and any other stock exchange upon which its capital stock or other
securities is listed or quoted all forms, reports and documents required to be
filed therewith by the Company under the Exchange Act or the Securities Act or
any of the rules and regulations promulgated thereunder. All such forms, reports
and documents shall comply as to form, content and otherwise with all applicable
requirements of the Exchange Act, the Securities Act and the rules and
regulations promulgated thereunder.
3. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Illinois without regard to conflicts of laws
principles.
(b) Assignment. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto.
No party hereto may assign any of its rights or delegate any of its obligations
under this Agreement to any other person or entity without the prior written
consent of the other parties hereto.
(c) Entire Agreement. This Agreement, the Stock Purchase Agreement and
the other documents delivered pursuant thereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein.
(d) Severability. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
(e) Amendment and Waiver. Except as otherwise expressly provided, this
Agreement may be amended or modified, and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only upon the written consent of the Company
and the Requisite Holders.
(f) Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to the Holders, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
the Holders' part of any breach, default or noncompliance under the Agreement or
any waiver on such Holders' part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to the Holders, shall be cumulative and
not alternative.
(g) Notices. All notices required or permitted hereunder shall be given
in accordance with Section 11(h) of the Stock Purchase Agreement.
(h) Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
(j) Parties in Interest. Nothing in this Agreement is intended to
provide any rights or remedies to any person or entity other than the parties
hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date set forth in the first paragraph hereof.
SELLERS:
- ------------------------------- -------------------------------
Leo J. Manta ......... Steven A. Manta
- ------------------------------- -------------------------------
Michael J. Chakos ......... John L. Manta
- ------------------------------- -------------------------------
Allan DeLange ......... John L. Manta, as Trustee of
......... Zachary Manta Trust
- ------------------------------- -------------------------------
Leo G. Manta ......... John L. Manta, as Trustee of
......... Alexander Manta Trust
- ------------------------------- -------------------------------
Jon S. Claypool ......... John L. Manta, as Trustee of
......... Erica Manta Trust
BUYER:
EIF HOLDINGS, INC.
By: .........
Frank J. Fradella, President
g:\common\corp\agreemnt\stockpur\eif-exh\exhibit.reg
Page 213
GUARANTY
WHEREAS, EIF HOLDINGS, INC., a Hawaii corporation ("Buyer"), and LEO
J. MANTA, STEVEN A. MANTA, MICHAEL J. CHAKOS, JOHN L. MANTA, ALLAN DeLANGE,
JOHN L. MANTA, as TRUSTEE OF ZACHARY MANTA TRUST, JOHN L. MANTA, as TRUSTEE
OF ERICA MANTA TRUST, JOHN L. MANTA, as TRUSTEE OF ALEXANDER MANTA TRUST,
LEO G. MANTA AND JON S. CLAYPOOL (collectively, the "Sellers") are parties
to a certain Stock Purchase Agreement dated September 30, 1997 (the "Stock
Purchase Agreement"), whereby the Buyer has agreed to purchase from the
Sellers, and the Sellers have agreed to sell to the Buyer, all of the
outstanding capital stock of J.L. Manta, Inc., an Illinois corporation (the
"Company").
WHEREAS, in consideration of the Sellers selling, transferring,
assigning, and delivering to the Buyer all of its right, title and interest in
and to the Shares of the Company, the Buyer has agreed to pay the Sellers, in
accordance with and in the amount specified in Section 2(b) of the Stock
Purchase Agreement, the sum of Seven Million Six Hundred Thousand
($7,600,000.00) Dollars, with Two Million, Two Hundred Thirty-Five Thousand,
Three Hundred and Twelve ($2,235,312.00) Dollars, in the aggregate, to be paid
to the Sellers in the form of Convertible Promissory Notes issued by the Buyer
(the "Convertible Promissory Notes");
WHEREAS, pursuant to the terms of the Stock Purchase Agreement, Buyer
has agreed to enter into Retention Bonus Agreements with certain key employees
of the Company (the "Retention Bonus Agreements") pursuant to which such
employees shall be paid up to Nine Hundred Thousand ($900,000.00) Dollars, with
Six Hundred Thirty-Five Thousand, Two Hundred Ninety-One and 99/100
($635,291.99) Dollars paid at the Closing and Two Hundred Sixty-four Thousand,
Seven Hundred Eight and 01/100 ($264,708.01) Dollars to be paid subsequent to
the Closing (such payments as are to be paid after the Closing pursuant to the
Retention Bonus Agreements being hereinafter referred to as the "Retention Bonus
Payments");
WHEREAS, the obligations of the Buyer under the Convertible Promissory
Notes and the Retention Bonus Agreements are subject to certain rights of
recoupment by the Buyer pursuant to Section 8(g) of the Stock Purchase Agreement
with respect to any claims of Buyer arising under the Stock Purchase Agreement
or the Sellers' Transaction Documents (the "Recoupment Rights"), which
recoupment rights may result in a reduction of the payments due from Buyer
either under the Convertible Promissory Notes or the Retention Bonus Agreements;
WHEREAS, in accordance with the terms and conditions of the Stock
Purchase Agreement, and the terms and conditions of this Guaranty, the
undersigned has agreed to jointly and severally guaranty the Buyer's obligation
to make payments of principal, interest and other costs and expenses when due,
whether at maturity or earlier, by reason of acceleration or otherwise, under
and pursuant to the Convertible Promissory Notes and Buyer's obligation to make
the Retention Bonus Payments when payable, either as scheduled or earlier by
reason of acceleration of otherwise under and pursuant to the Retention Bonus
Agreements, as the amount or timing of such payments may be reduced or changed
pursuant to and specifically in accordance with the procedures set forth in
Section 8(g) of the Stock Purchase Agreement (collectively, the "Payment
Obligations"); and
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and as an inducement to the Sellers
to enter into the Stock Purchase Agreement with the Buyer, the undersigned
hereby guarantees the Buyer's full performance and observance of the Payment
Obligations, and expressly agrees that the validity of this Guaranty, and the
obligations of the undersigned hereunder, shall in no manner be terminated,
effected or impaired by reason of (a) the validity or enforceability of the
Payment Obligations or of any document evidencing the Payment Obligations, (b)
the granting by the Sellers of any consents, waivers or other indulgences to the
Buyer or by the reason of the assertion by the Sellers against the Buyer of any
of the rights or remedies reserved to the Sellers pursuant to the Payment
Obligations, or (d) the relief of the Buyer from the Payment Obligations by
operation of law or otherwise (including, without limitation, the rejection or
subordination of said Payment Obligations in connection with the proceedings
under the state or federal bankruptcy or insolvency laws now or hereinafter
enacted), the undersigned hereby waiving all suretyship defenses or other
circumstances that might otherwise constitute a legal or equitable discharge or
defense of a guarantor.
It is expressly stated in this Guaranty and agreed that the obligations
of the undersigned do not include any obligation of the Buyer to convert the
Payment Obligations into shares of the Buyer's stock, and the undersigned shall
have no liability hereunder as a result of any failure of Buyer to convert the
Payment Obligations into shares of the Buyer's stock or to provide the Sellers
with any of the Alternative Compensation Arrangements, as defined in the Stock
Purchase Agreement,
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<PAGE>
This Guaranty shall be a continuing, absolute and unconditional
guaranty, and shall remain in full force and effect until all of the Payment
Obligations (including any extensions thereof) and all costs and expenses
payable by the undersigned hereunder shall have been indefeasibly paid in full.
This Guaranty may be enforced by the Sellers notwithstanding the delivery of any
Default Notice under the terms of the Convertible Promissory Notes. The
undersigned further agrees that, if at any time all or any part of any payment
theretofore applied by the Sellers to the Payment Obligations is or must be
rescinded by the Sellers for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of the Buyer), the
Payment Obligations shall, for the purposes of this Guaranty, to the extent that
such payment is or must be rescinded or returned, be deemed to have continued in
existence, notwithstanding such application by the Sellers, and this Guaranty
shall continue to be effective or reinstated, as the case may be, as to the
Payment Obligations as if any such application had not been made.
Notwithstanding the foregoing, in the event that the Buyer fails to make payment
of the Payment Obligations, as such Payment Obligations become due and payable,
the Sellers agree to give notice of such default to the undersigned, and the
undersigned shall have twenty (20) days from the date of such notice to cure
Buyer's default (the "Cure Period"). During the Cure Period, and after the Cure
Period in the event that the default has been cured, each of the Sellers agrees
not to exercise any of his rights and remedies under the Convertible Promissory
Notes and the Retention Bonus Agreements, including, without limitation, any
right to accelerate the Payment Obligations, arising as a result of such
default. Sellers are hereby authorized, without notice or demand, and without
affecting the liability of the undersigned hereunder, to at any time and from
time to time (i) renew, extend, modify, accelerate or otherwise change the time
for payment of, or other terms of the Payment Obligations; (ii) accept partial
payments on the Payment Obligations, (iii) take and hold security or collateral
for the payment of the Payment Obligations guaranteed hereby, (iv) apply such
security or collateral and direct the order or manner of sale thereof as in
their sole discretion they may determine; and (v) settle, release, compromise,
collect or otherwise liquidate the Payment Obligations and any security and
collateral therefor in any manner, without affecting or impairing the
obligations of the undersigned hereunder.
It is agreed that the failure of the Sellers to insist in one or more
instances upon the strict performance or observance of the Buyer's Payment
Obligations under the Convertible Promissory Notes or Retention Bonus Agreement
or to exercise any right therein contained shall not be construed or deemed to
be a waiver or relinquishment of any of the Payment Obligations, but the same
shall continue and remain in full force and effect.
Representations, Warranties and Covenants. The Undersigned represents,
warranties and covenants to Sellers that:
i. The statements contained in this Guaranty are true and correct.
ii. The execution, delivery, and performance by the
undersigned of this Guaranty are within the undersigned's corporate powers, have
been duly authorized by all necessary corporate action, and do not (a)
contravene the undersigned's charter or bylaws or (b) violate any law, rule,
regulation, order, writ, judgment, decree, or award.
iii. This Guaranty, when duly executed and delivered, will
constitute a legal, valid and binding obligation of the undersigned, enforceable
against the undersigned in accordance with its terms.
The undersigned waives all defenses, counterclaims and offsets of any
kind or nature with respect to this Guaranty, including, without limitation, any
defense, counterclaim or offset in connection with the validity and/or
enforceability of this Guaranty, arising directly or indirectly from any
agreement, instrument or document executed and delivered, by the Buyer to
Sellers. To the extent the Buyer has exercised its Recoupment Rights, the
undersigned is entitled to any reduction or deferral of the Payment Obligations
in accordance with the applicable terms of the Convertible Promissory Notes, the
Retention Bonus Agreements and Section 8(g) of the Stock Purchase Agreement.
Until all of the Payment Obligations are paid in full, the undersigned
waives any and all rights of subrogation, reimbursement, indemnity, exoneration,
contribution, assignment, implied contract or any other claim which it may now
or hereafter have against the Buyer or any other person directly or contingently
liable for the Payment Obligations, or against or with respect to the Buyer's
property, arising from the existence or performance of this Guaranty. In
furtherance, but not in limitation, of the preceding waiver, the undersigned
agrees that, with respect to any claim of the Sellers, any payment to Sellers by
the undersigned pursuant to this Guaranty shall be deemed a contribution to the
capital of the Buyer and any such payment shall not constitute the undersigned a
creditor of the Buyer.
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<PAGE>
The undersigned waives any right to assert against Sellers as a
defense, counterclaim, set off or cross claim to the payment or performance of
Payment Obligations, any defense (legal or equitable) set off, counterclaim or
claim which the undersigned may now or at any time or times hereafter have
against the Buyer or any other party liable to the Sellers in any way or manner.
The undersigned hereby waives notice of the following events or
occurrences and agrees that the Sellers may do any or all of the following in
such manner, upon such terms and at such times as the Sellers deem advisable
without in any way impairing, affecting, reducing or releasing the undersigned
from Payment Obligations: (i) Sellers' acceptance of this Guaranty; (ii)
presentment, demand, notices of default , non-payment, partial payment and
protest, and all other notices or formalities to which the undersigned may be
entitled (other than the notices provided for in this Guaranty); (iii) Sellers'
heretofore, now or at any time or times hereafter granting to the Buyer (and any
other party liable to Sellers on account of the Payment Obligations) of any
indulgences or extensions of time of payment of the Payment Obligations; and
(viii) Sellers' heretofore, now or at any time or times hereafter, accepting
from the Buyer or any other party any partial payment or payments on account of
the Payment Obligations or Sellers settling, subordinating, compromising,
discharging or releasing the same.
No assignment or other transfer of the Payment Obligations, or any
interest therein or rights thereunder, shall operate to extinguish or diminish
the liability of the undersigned guarantor under this Guaranty; and whenever
reference is made to any Payment Obligation of the Buyer in the Convertible
Promissory Notes or the Retention Bonus Agreements such reference shall be
deemed likewise to refer to the undersigned guarantor.
The undersigned agrees to pay on demand all out of pocket costs and
expenses (including the reasonable fees and expenses of counsel for any of the
Sellers') of the Sellers in connection with the enforcement of this Guaranty,
whether in any action, suit or litigation, any bankruptcy, insolvency or other
proceeding of any nature.
It is further agreed that all of the terms and provisions hereof shall
inure to the benefit of the Sellers and their successors and assigns, and shall
be binding upon the undersigned and its successors and assigns.
Capitalized terms used herein shall have the same meanings that such
terms have when used in the Stock Purchase Agreement unless the context clearly
requires otherwise or otherwise defined herein this Guaranty. All rights, duties
and remedies of the parties shall be governed as to interpretation, validity,
effect and enforcement, and will be governed in all other respects, by the laws
of the State of Illinois.
IN WITNESS WHEREOF, the undersigned guarantor has duly executed this
instrument this ______ day of October, 1997, as a sealed instrument.
AMERICAN ECO CORPORATION
By:_______________________________
Michael E. McGinnis, President
STATE OF ________________
October ___, 1997
Then personally appeared the above-named Michael E. McGinnis, President
of American Eco Corporation and acknowledged that he is authorized to execute
this instrument and that it is his free act and deed and that of American Eco
Corporation, before me,
Notary Public
My Commission Expires:
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<PAGE>
The provisions of this Guaranty are hereby accepted and agreed as of November
18, 1997.
- ------------------------------- ---------------------------------
Leo J. Manta Steven A. Manta
- ------------------------------- ---------------------------------
Michael J. Chakos John L. Manta
- ------------------------------- ---------------------------------
Allen DeLange John L. Manta, as Trustee of
Zachary Manta Trust
- ------------------------------- ---------------------------------
Leo G. Manta John L. Manta, as Trustee of
Alexander Manta Trust
- ------------------------------- ----------------------------------
Jon S. Claypool John L. Manta, as Trustee of
Erica Manta Trust
g/common/corp/guaranty/eif.doc
Page 217
15
EMPLOYMENT AGREEMENT
AGREEMENT made this _____ day of November, 1997, by and between J. L.
MANTA, INC., a corporation duly organized and existing under the laws of the
State of Illinois, with a principal place of business at 5233 Hohman Avenue,
Hammond, Indiana 46320 (hereinafter referred to as "Employer") and John L.
Manta, an individual residing at 820 South Adams, Hinsdale, Illinois 60521
(hereinafter referred to as "Employee").
RECITALS
This Employment Agreement has been executed and delivered pursuant to
the terms and conditions of a certain Stock Purchase Agreement, dated September
30, 1997, by and between, inter alia, EIF Holdings, Inc., an Hawaii corporation
(the "Buyer"), and such "Sellers" named therein (the "Stock Purchase Agreement")
whereby the Buyer has agreed to purchase all of the issued and outstanding
capital stock of the Employer. Capitalized terms used in this Agreement without
definition shall have the respective meanings set forth in the Stock Purchase
Agreement.
The Buyer and the Employer desire to ensure the Employee's continued
employment with the Employer, and the Employee wishes to accept such continued
employment, upon the terms and conditions set forth in this Agreement.
In consideration of the mutual covenants hereinafter set forth, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Employer and Employee hereby agree as follows:
Section 1. Employment.
1.1 Employment. Upon the terms and conditions set forth
herein, Employer hereby employs Employee and Employee accepts such employment.
1.2 Term. The term of the employment shall be for a period of
three (3) year(s) beginning on the date hereof and ending on November ____, 2000
(the "Initial Term of Employment"), and shall continue on an at-will basis
thereafter (collectively, the "Term of Employment"), subject to the provisions
of Section 5 hereinbelow.
1.3 Duties.
(a) Capacity. During the Term of Employment, Employee
shall hold the position of President of the Employer. Employee
shall have and perform all of the duties and responsibilities
customarily attributed to such position and all other services
incident thereto and shall render such other services and
discharge such other responsibilities as may be assigned to
him from time to time by the Board of Directors of Employer or
such other executive officer as may be designated by the Board
of Directors of Employer; provided, however, that Employee
shall not be required (and it shall not be a basis for
termination for
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<PAGE>
cause hereunder for Employee to refuse) to render duties of a
nature substantially inconsistent with those customarily
performed by officers holding positions similar to that held
by Employee at companies similar to Employer.
(b) Schedule. In carrying out his duties and
responsibilities hereunder, Employee shall strictly abide by
the policies of Employer and shall devote all of his time,
attention, energies, skills, and best efforts exclusively to
the performance of his duties and responsibilities for and on
behalf of Employer. Without limiting the generality of the
foregoing, Employee shall devote not less than five (5) days
per week (except for regular business holidays observed by
Employer and Employee's vacation days) to his employment and
shall be present on Employer's premises or actively engaged in
service to or on behalf of Employer during normal business
hours Monday through Friday.
(c) Exclusivity. Without limiting the generality of
the foregoing, during the Term of Employment, Employee shall
not, without the prior written approval of Employer, render
services of a business, professional or commercial nature for
compensation to any other entity or person; provided, however,
this clause shall not prohibit Employee from making
investments of a passive nature (other than investments of
more than three (3%) percent of the outstanding shares of
companies engaged in any business which is directly or
indirectly competitive with or similar to the business now or
hereafter conducted by the Employer) which do not detract from
the full-time nature of Employee's employment hereunder.
(d) Relocation. Employer shall not require Employee
to render his duties hereunder from a principal place of
business more than fifty (50) miles from the principal place
of business at which Employee is providing services to
Employer as of the date of the execution of the Stock Purchase
Agreement, unless such relocation of Employee is directed
pursuant to a business plan for Employer adopted in good faith
by Buyer and approved by the President and Chief Executive
Officer of Buyer.
1.4 Compensation and Benefits. During the Term of Employment,
as compensation for the services to be rendered during such period and the other
obligations undertaken by Employee hereunder, Employee shall be entitled to the
following compensation:
(a) Base Salary. Employer agrees to pay or cause to
be paid to Employee for his services a base salary at the rate
of One Hundred Fifty Thousand ($150,000.00) Dollars per year
(the "Initial Base Salary"), payable in accordance with
Employer's normal payroll periods and subject to the usual
payroll deductions. From time to time during the Term of
Employment, the Employer may review and, if appropriate, after
the Initial Period of Employment, adjust the Employee's base
salary in its sole discretion.
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<PAGE>
(b) Benefits. During the Term of Employment, Employee
shall be eligible to receive and participate in all other
employment plans and benefits which the Employer customarily
provides its employees in the same or substantially equivalent
positions to that of Employee hereunder, including, without
limitation, paid vacation and holidays, health, life, and
disability insurances, cafeteria plans, medical reimbursement
plans and 401(k) plans, all such plans and benefits to be
substantially comparable to the plans and benefits as made
available to Employee as of the date of the execution of the
Stock Purchase Agreement; provided, however, that nothing
herein shall be construed to in any manner prohibit Employer
from changing the carrier or provider for any such plans or
benefits or from replacing any current plans and benefits with
substantially comparable plans and benefits. All such benefits
shall be governed solely by the terms and conditions of the
applicable employment policies or plans providing for such
benefits. Employer shall further provide to Employee an
automobile (or an equivalent automobile allowance) and
automobile insurance to the extent and in the manner the same
are provided by the Employer to the Employee as of the date of
the execution of the Stock Purchase Agreement.
(c) Expenses. During the Term of Employment, Employer
shall reimburse Employee promptly for reasonable and necessary
travel, lodging, entertainment and other out-of-pocket
expenses in connection with his employment hereunder in
accordance with the policies of Employer in effect from time
to time and upon Employee timely submitting such expenses for
reimbursement and providing the Employer with such
documentation substantiating such expenses as Employer may
reasonably require.
Section 2. Development of Inventions, Improvements or Know-How.
2.1 Information. During the Term of Employment, Employee shall
keep Employer informed of any and all promotional and advertising materials,
catalogs, brochures, plans, customer lists, supplier lists, manuals, handbooks,
inventions, discoveries, improvements, trade secrets, secret processes and any
technology, know-how or intellectual property made or developed by him, in whole
or in part, or conceived of by him, alone or with others, which results from any
work he may do for, or at the request of Employer, or which relates in any way
to the business and/or operations of Employer, or which relates to the
Employer's actual or demonstrably anticipated research or development
(collectively the "Information").
2.2 Assignment of Rights. Employee, and his heirs, assigns and
representatives shall assign, transfer and set over, and do hereby assign,
transfer and set over, to Employer, and its successors and assigns, all of his
and their right, title and interest in and to any and all Information, and any
patents, patent applications, copyrights, trademarks, tradenames or other
intellectual property rights relating thereto, provided or conceived by Employee
during the Term of Employment.
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<PAGE>
2.3 Further Assurances. To the extent Employer deems
reasonably necessary or desirable to affect the intent of the assignments,
transfers and set-overs provided for in Sections 2.1 and 2.2 hereinabove,
Employee, and his heirs, assigns or representatives, shall, at the expense of
Employer, assist Employer or its nominees to obtain patents, copyrights,
trademarks and tradename or similar rights of protection (including any renewals
or continuations thereof) for any and all Information in any country or
countries throughout the world. Employee, and his heirs, assigns and
representatives shall at Employer's sole cost and expense execute and deliver
any and all applications, assignments or other instruments reasonably necessary
or desirable to secure United States or foreign patents, copyrights, trademarks
and tradenames or similar rights of protection (including any renewals or
continuations thereof), and to transfer to Employer, upon request, any and all
right, title or interest of Employee in and to any and all such Information.
Employee, and his heirs, assigns and representatives shall give Employer, upon
request, any and all facts known to him or them reflecting such Information with
respect to any of the foregoing, including, without limitation, any and all
formulae, processes, sketches, drawings, models and figures.
Section 3. Non-Disclosure.
Employee hereby acknowledges that Employer possesses certain
confidential and proprietary information, including, but not limited to client
and customer lists, supplier lists, data, figures, sales figures, projections,
estimates, tax records, personnel history, accounting procedures, bids, and
other information relating to the Employer's employees, clients, customers,
client and customer requirements, methods of client development, suppliers,
bidding techniques, pricing, research and development and other activities,
services and business of the Employer (the foregoing being hereinafter referred
to collectively as "Confidential Information") and that maintaining the
confidential and proprietary nature of said Confidential Information is
essential to the continued commercial success of the Employer's business and
that said Confidential Information constitutes valuable and unique assets which
provide the Employer with a distinct competitive advantage over competing
businesses. Confidential Information shall not include any such information
which (a) is or becomes publicly known through no wrongful act of Employee (b)
is approved in advance of such use or disclosure in writing by Employer, or (c)
is required to be disclosed by court order or lawful order of a governmental
agency or regulatory body or by applicable law; provided, however, that in the
event the Employee is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, Employee shall notify Employer promptly of such request or
requirement so that Employer may seek an appropriate protective order or waive
compliance with the provisions of this Section 3. If, in the absence of
protective order or the receipt of a waiver hereunder, Employee is, on the
advice of counsel, compelled or required by applicable law to disclose any
Confidential Information to any tribunal, Employee may disclose the Confidential
Information, provided that Employee shall use his reasonable best efforts to
obtain, at the request and sole expense of Employer, an order or other assurance
that confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Employer shall designate. Therefore,
Employee hereby agrees that Employee shall
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<PAGE>
not disclose, divulge, or use in any manner any such Confidential Information
except as is specifically required in the performance of Employee's duties
pursuant to this Employment Agreement, and that Employee will not, under any
circumstances, communicate any such Confidential Information to any one not
employed by the Employer and/or specifically authorized in writing by the
Employer to receive such Confidential Information. It is expressly agreed that
the foregoing restrictions upon use, disclosure or communication of the
aforementioned Confidential Information shall be in full force and effect
forever and shall survive any termination of this Agreement, whether voluntary
or involuntary, and regardless of the reason for or manner of termination. Upon
the termination of this Agreement and Employee's employment hereunder,
regardless of the reason for or manner of termination, Employee agrees that
Employee will deliver to the Employer all originals and all copies in the
Employee's possession of any and all documents of any nature containing,
evidencing, or in any manner relating to any Confidential Information as defined
herein and shall not take any such documentation with Employee upon said
termination. Employer acknowledges and agrees that notwithstanding the
foregoing, Employee shall not be prohibited from utilizing and disclosing
Confidential Information in connection with any action, suit, or other
proceeding arising out of or in connection with the terms and provisions of the
Stock Purchase Agreement and/or the other Buyer's Transaction Documents;
provided, however, that Employee agrees that in connection with any action,
suit, or other proceeding, no such disclosure of the Confidential Information
shall be made until such time as an appropriate protective order, mutually
acceptable to Employer and Employee, shall be entered in any such action, suit,
or proceeding or, in the event the parties cannot mutually agree upon the terms
for such a protective order, upon the issuance of a protective order, upon
motion by either party, as shall be determined to be appropriate by the trier of
facts or arbitrator in any such proceeding.
Section 4. Covenant Not To Compete.
4.1 Acknowledgment. Employee acknowledges that he is being
employed by the Employer in a position in which he will be expected to
independently develop and maintain close relationships with customers and
clients of the Employer and in which he will be provided with access to
Confidential Information of Employer, and that such customer relationships and
Confidential Information constitute a significant part of the goodwill of the
Employer, the preservation of which is essential to the success of the Employer,
and that the Employer has a legitimate interest in restricting Employee's
ability to take advantage of such relationships and Confidential Information.
Employee further acknowledges that the rights, benefits, and privileges which
Employee has received pursuant to the Stock Purchase Agreement constitute
additional consideration for the Employee's covenants as set forth in this
Section 4.
4.2 Non-Competition Agreement.
(a) In light of the foregoing, and in consideration
of the continued employment of Employee hereunder, and for
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by Employee,
Employee hereby covenants and agrees that, during the Term of
Employment and, except as expressly provided in Section 4.2(b)
hereinbelow, for a period of two (2) years after any
termination of this Employment Agreement and/or Employee's
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employment hereunder, whether voluntary or involuntary, and
regardless of the reason for or manner of termination,
Employee shall not, alone or with others, directly or
indirectly (as owner, stockholder, partner, lender, other
investor, director, officer, employee, consultant, or
otherwise):
(i) Solicit, perform or engage in any
business of the same or similar nature to the
business of Employer anywhere within the Employer's
Territories (as hereinafter defined);
(ii) Solicit, engage in, perform, divert or
accept any business of the same or similar nature to
the business of Employer with or from any Customer
(as hereinafter defined) or Potential Customer (as
hereinafter defined) of Employer; or
(iii) Induce or attempt to induce any
Customer to reduce such Customer's business with
Employer or divert such Customer's business from the
Employer, by direct advertising, solicitation or
otherwise;
(iv) Disclose the names of any Customers or
Potential Customers of Employer to any other person,
firm, corporation or other entity which is engaged in
a business of the same or similar nature to the
business of Employer; or
(v) Employ, hire, cause to be employed or
hired, entice away, solicit, or establish a business
with any then current officer, employee, servant or
agent of Employer, or any other person who was
employed by Employer within the twelve (12) months
immediately prior to such employment or
establishment, or in any manner persuade or attempt
to persuade any officer, employee, servant or agent
of Employer to leave the employ of the Employer; or
(vi) Assist any person, firm, entity,
employer, business associate or member of Employee's
family to commit any of the foregoing acts.
(b) Notwithstanding anything to the contrary
contained herein, the terms and provisions of Section 4.2(a)
above shall not apply and shall have no further force or
effect after any termination of this Agreement:
(i) If Employer terminates this Agreement
and Employee's employment hereunder for any reason
other than as specified in Section 5.1(c)
hereinbelow;
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(ii) If Employee terminates this Agreement and
Employee's employment hereunder pursuant to Section
5.1(d) hereof; or
(iii) In the event that Employer shall
discontinue operating its business (provided,
however, that any sale of the Employer's business,
either through a sale of all or a majority of the
stock of Employer or all or substantially all of the
assets of Employer, shall in no manner and in no
event constitute a discontinuation of the Employer's
business (other than in the context of a liquidation
or other similar circumstance where the business of
the Employer will not be continued or operated by any
third party to which such assets of the Employer have
been transferred).
4.3 Definitions. For purposes of this Section 4, the following
terms shall have the meanings hereinafter set forth:
(i) The term "Customer" shall mean any person, firm,
corporation or other entity or any parent, subsidiary or
affiliate thereof with which Employer has had a contract,
engaged in any business with or for which Employer has
performed any work or services during the twenty-four (24)
months immediately preceding Employee's termination and up to
and including the date of Employee's termination;
(ii) The term "Potential Customer" shall mean any
person, firm, corporation or other entity or any parent,
subsidiary or affiliate thereof from which Employer has
solicited or attempted to solicit any business or to which
Employer has submitted any written or oral proposal within the
twelve (12) months immediately preceding Employee's
termination and up to and including the date of Employee's
termination.
(iii) The term "Employer's Territories" shall mean
any market or geographic area in which Employer has performed
any work or services for any person, firm, corporation, or
other entity during the twenty-four (24) months immediately
preceding Employee's termination and up to and including the
date of Employee's termination and/or any market or geographic
area in which Employer has solicited any work or services from
any person, firm, corporation, or other entity during the
twelve (12) months immediately preceding Employee's
termination and up to and including the date of Employee's
termination.
(iv) The phrase "business of the same or similar
nature to the business of Employer" shall mean the supplying
of products, work or services which have the same or similar
characteristics as, or is competitive with, any products, work
or services engaged in, performed by or rendered by Employer
at the time of the termination of this Agreement and/or within
the twenty-four (24) months immediately preceding such
termination and/or any products, work or services which have
been the subject of any solicitation or proposal by Employer
within the twenty-four (24) months immediately preceding such
termination.
4.4 Enforcement. The covenants and obligations of Employee
pursuant to this Section 4 shall be specifically enforceable in addition to and
not in limitation of any other legal or equitable remedies, including monetary
damages, which Employer may have. Employee recognizes and acknowledges that
irreparable injury may result to Employer in its business in the event of any
breach by Employee of any covenant or agreement contained herein, and, by reason
of the foregoing, Employee consents and agrees that in the event of any such
breach, Employer shall be entitled, in addition to any other remedies that it
may have, including monetary damages, to an injunction to restrain Employee from
committing or continuing any violation of any covenant or agreement set forth in
this Section 4. It is the intent of the parties hereto that this Agreement
contains covenants which are valid and enforceable, which are reasonable and
necessary to safeguard the interests of Employer and which will be binding upon
Employee. Therefore, in the event that any of the obligations of Employee are
determined to be unreasonable or unenforceable because of the duration of such
provision, the area covered thereby or the scope thereof so as to render any of
the foregoing covenants unenforceable, then such a covenant shall be interpreted
as to require only a reasonable duration, area or scope, and any Court making
any such determination shall have the power to reduce the duration, area or
scope of such provision and/or to delete or revise specific words and phrases,
and, in its reduced or revised form, such provisions shall be enforceable and
shall be enforced.
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4.5 Subsequent Employment. After termination of the Employee's
employment with the Employer, regardless of the reason for or manner of
termination, the Employee will, if the covenant under this Section 4 is then in
effect, give notice to the Employer within ten (10) days after accepting any
other employment, of the identity of the Employee's employer. The Buyer or the
Employer may notify such employer that the Employee is bound by this Agreement,
and, at the Employer's election, furnish such employer with a copy of this
Agreement or relevant portions thereof.
Section 5. Termination of Agreement.
5.1. Right to Terminate.
(a) Death. This Agreement shall terminate immediately
upon Employee's death.
(b) Disability. In the event that Employee, become
Disabled, as defined below, unless otherwise prohibited by
applicable law, Employer shall have the right to terminate
Employee's employment hereunder upon five (5) days prior
written notice to Employee. For purposes of this Section 5.1
(b), "Disabled" means that, because of accident, disability,
or physical or mental illness, Employee is incapable of
performing his duties hereunder for either (i) a continuous
period of one hundred twenty (120) days and remains so
incapable at the end of such one hundred twenty (120) day
period; or (ii) periods amounting in the aggregate to one
hundred eighty (180) days within any one period of three
hundred sixty-five (365) days and remains so incapable at the
end of such aggregate period of one hundred eighty (180) days.
(c) Termination by Employer for Cause. Employer shall
have the right to terminate Employee's employment hereunder
for cause immediately without prior notice to Employee. The
term "cause" shall mean (i) any failure by Employee to perform
any of the material duties assigned to Employee pursuant to
this Agreement, which failure has not been cured within five
(5) days after receipt of written notice from Employer (except
that, in the event of any subsequent failure by Employee to
perform the same or similar material duties as were the
subject of any previous notice given by Employer pursuant
hereto within any twelve (12) month period, no such notice
from the Employer shall be required); (ii) any breach by
Employee of any of the material terms of this Agreement which
breach has not been cured within five (5) days after receipt
of written notice of such breach from Employer (except that,
in the event of any subsequent breach by Employee of the same
or similar material terms of this Agreement as were the
subject of any previous notice given by Employer pursuant
hereto within a twelve (12) month period, no such notice from
the Employer shall be required); or (iii) misappropriation of
any business opportunity; or (iv) fraud, embezzlement or
misappropriation of funds involving assets of the Employer,
its customers, suppliers, or any of their affiliates; or (v)
conviction of Employee of any criminal offense which adversely
affects Employee's ability to perform his duties hereunder or
the reputation of Employer; or (vi) the willful and repeated
breach or habitual neglect by Employee of his material duties
under this Agreement (after the Employee has received at least
one (1) written notice from Employer identifying such willful
and repeated breach or habitual neglect and has been given a
period of at least five (5) days to cease and desist such
conduct); or (vii) Employee making disparaging statements to
third parties or other employees of Employer about the
Employer, its parent, affiliates or subsidiaries or their
business after Employee has received written notice from
Employer identifying such disparaging statements and
requesting that Employee cease making such statements.
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(d) Termination by Employee for Cause. Employee shall
have the right to terminate this Agreement hereunder for cause
in the event that: (i) Employer shall fail (other than as the
result of a termination by Employer in accordance with the
terms of this Section 5.1) to provide Employee with his
compensation as agreed upon herein and shall fail to have
cured any such breach within five (5) days after written
notice thereof from Employee to Employer (except that, in the
event of any subsequent failure by Employer to provide
Employee with his compensation as agreed upon herein within
any twelve (12) month period, no such notice from the Employee
shall be required); (ii) either (A) Employer has failed to
make a payment due under the Convertible Promissory Note
issued to the Employee pursuant to the Stock Purchase
Agreement, and such failure constitutes an Event of Default
thereunder, or (B) Employer has failed to make a payment due
under the Employee's Retention Bonus Agreement (as defined in
the Stock Purchase Agreement), and such failure constitutes a
default thereunder, or (iii) after the expiration of the
Initial Period of Employment, Employer reduces the Employee's
Base Salary provided for in Section 1.4(a) above.
Notwithstanding the foregoing, Employee shall not have the
right to terminate this Agreement hereunder for cause pursuant
to Section 5.1(d)(ii) or Section 5.1(d)(iii) above in the
event that either: (x) in the case of a termination pursuant
to Section 5.1(d)(ii) above, Employee has exercised his rights
under the Guaranty (as defined in the Stock Purchase
Agreement) of American Eco Corporation ("American Eco") as a
result of the default of the Employer referenced in Section
5.1(d)(ii)(A) or 5.1(d)(ii)(B) above, and American Eco has
made payment to Employee pursuant to (and otherwise satisfied
its obligations under) the terms of such Guaranty (as defined
in the Stock Purchase Agreement); or (y) in the case of
termination pursuant to either Section 5.1(d)(ii) or Section
5.1(d)(iii) above, the Net Operating Income of the Employer is
less than One Dollar ($1.00) for the twelve (12) months
immediately preceding the date on which Employee exercises his
right to terminate for cause pursuant to either Section
5.1(d)(ii) or Section 5.1(d)(iii), provided that Employee
shall exercise such right to terminate for cause pursuant to
Section 5.1(d)(ii) or Section 5.1(d)(iii) within at least
thirty (30) days after the date of the occurrence of the
default which is the subject of Employee's right to terminate.
The term "Net Operating Income" means the net income from
operations of Employer before any reduction for taxes or any
allocation of expenses, charges, costs or other corporate
overhead from Buyer determined in accordance with generally
accepted accounting principles applied on a consistent basis.
(e) Bankruptcy. Employer shall have the right to
terminate this Agreement and Employee's employment hereunder
immediately without prior notice to Employee, in the event of
the bankruptcy, liquidation or reorganization of Employer or
the appointment of a receiver of the assets of Employer
initiated by a creditor of Employer that is not an affiliate
thereof.
(f) Other. Notwithstanding anything to the contrary
contained herein, after the Initial Period of Employment, this
Employment Agreement and Employee's employment with Employer
may be terminated by either party with or without cause at any
time and for any reason.
(g) Rights and Obligations of Employee Upon Termination.
(i) Except for any termination by Employee
pursuant to Section 5.1(d) above (in which event
Employee shall be entitled to exercise any and all
remedies he may have hereunder or otherwise,
including at law or in equity), upon the termination
of Employee's employment pursuant to Section 5.1 of
this Agreement, Employer shall not have any further
obligation to Employee under this Agreement except to
distribute to Employee his Base Salary and other
benefits and expense reimbursement and any earned and
accrued unpaid vacation time due pursuant to Section
1.4 hereof (and accrued vacation pay, if any) up to
the date of termination.
(ii) Upon the termination of this Agreement
and Employee's employment hereunder, whether
voluntary or involuntary, and regardless of the
reason for or manner of termination, all of the
obligations of Employee under Sections 2.2, 2.3, 3,
and 4 shall remain in full force and effect and shall
survive the termination of this Agreement to the
extent set forth herein.
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Section 6. Miscellaneous.
6.1 Remedies.
(a) Injunctions. Inasmuch as any breach of, or
failure to comply with, this Agreement will cause serious and
substantial damage to both Employer and Employee, if either
party should in any way breach or fail to comply with the
terms of this Agreement, the other party shall be entitled to
an injunction restraining the defaulting party from such
breach or failure.
(b) Cumulative Remedies. All remedies of Employer and
Employee expressly provided for herein are cumulative of any
and all other remedies now existing at law or in equity. Each
of Employer and Employee shall, in addition to the remedies
herein provided, be entitled to avail itself of all such other
remedies as may now or hereafter exist at law or in equity for
compensation, and for the specific enforcement of the
covenants contained herein. Resort to any remedy provided for
hereunder or provided by law shall not prevent the concurrent
or subsequent employment of any other appropriate remedy or
remedies, or preclude the recovery by Employer of monetary
damages.
6.2 Recoupment. The Employer shall be entitled to recoup the
amount of any and all claims that the Buyer may have against the Employee under
the Stock Purchase Agreement by reducing any and all amounts owing to Employee
under this Agreement; provided, however, Employer may only exercise such right
of recoupment hereunder in accordance with the provisions of Section 8(g) of the
Stock Purchase Agreement and then only to the extent that recoupment of the
amount is not then available to Buyer under the Convertible Promissory Notes or
Retention Bonus Agreements (all as defined in the Stock Purchase Agreement).
6.3 Representations and Warranties by the Employee. The
Employee represents and warrants to the Employer that the execution and delivery
by the Employee of this Agreement does not, and the performance by the Employee
of the Employee's obligations hereunder will not, with or without the giving of
notice or the passage of time, or both: (a) violate any judgment, writ,
injunction, or order of any court, arbitrator, or governmental agency applicable
to the Employee; or (b) conflict with, result in the breach of any provisions of
or the termination of, or constitute a default under, any agreement to which the
Employee is a party or by which the Employee is or may be bound.
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6.4 Obligations Contingent on Performance. The obligations of
each party hereunder, including, but not limited to, the Employer's obligation
to pay Employee the compensation provided for herein, are contingent upon the
other party's performance of its obligations hereunder.
6.5 Amendment. This Agreement may be amended only by a writing duly
executed by the parties hereto.
6.6 Entire Agreement. This Agreement and any other agreements
expressly referred to herein set forth the entire understanding of the parties
hereto regarding the subject matter hereof and supersede all prior contracts,
agreements, arrangements, communications, discussions, representations and
warranties, whether oral or written, between the parties regarding the subject
matter hereof.
6.7 Notice. For purposes of this Agreement, notices and
communications provided or permitted to be given hereunder shall be deemed to
have been given when (i) made by telex, telecopy or facsimile transmission; or
(ii) sent by overnight courier or mailed by United States registered or
certified mail, return receipt requested, postage prepaid to the parties at
their addresses set forth above, or at such other addresses as either may
designate in writing as aforesaid from time to time.
6.8 Assignment. This Agreement is personal as to Employee and
shall not be assignable by Employee. Upon the prior written consent of Employee,
which consent shall not be unreasonably withheld or delayed, Employer may assign
its rights under this Agreement to any person, firm, corporation, or other
entity which may acquire all or substantially all of the business which is now
or hereafter conducted by Employer or which may require substantially all of the
assets of Employer or with or into which Employer may be consolidated or merged,
provided, that any such assignment shall be subject to the express terms and
conditions hereof; provided, however, that if Employee shall refuse to consent
to such assignment under the circumstances set forth herein, then Employer may
terminate this Agreement upon written notice to Employee, and any such
termination shall in no manner affect the obligations of Employee as set forth
in Sections 2, 3, 4.2(a), 4.3, 4.4 and 4.5 which shall all remain in full force
and effect and shall survive such termination of this Agreement by Employer.
6.9 Governing Law. This Agreement shall in all respects be governed
by, and construed in accordance with, the laws of the State of Illinois.
6.10 Severability. Each section and subsection of this
Agreement constitutes a separate and distinct provision hereof. It is the intent
of the parties hereto that the provisions of this Agreement be enforced to the
fullest extent permissible under the laws and public policies applicable in each
jurisdiction in which enforcement is sought. Accordingly, if any provision of
this Agreement shall be adjudicated to be invalid, ineffective or unenforceable,
the remaining provisions shall not be affected thereby. The invalid, ineffective
or unenforceable provisions shall, without further action by the parties, be
automatically amended to affect the original purpose and intent of the invalid,
ineffective and unenforceable provision; provided, however, that such amendment
shall apply only with respect to the operation of such provision in the
particular jurisdiction with respect to which such adjudication is made.
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6.11 Waiver. The failure of either Employer or Employee to
insist upon strict adherence to any term of this Agreement on any occasion shall
not be construed as a waiver of or deprive Employer or Employee, as the case may
be of the right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any waiver by either Employer or Employee must be
in writing and (i) in the case of a waiver by Employer, signed by a duly
authorized representative of Employer other than Employee or (ii) in the case of
a waiver by Employee, signed by Employee.
6.12 Headings. The headings of this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
6.13 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of which together will constitute one and the same instrument.
6.14 Third Parties. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
or entity other than Employer and Employee any rights or remedies under, or by
reason of, this Agreement.
6.15 Income Tax Reporting. As a condition to Employee's
entitlement to all amounts to be paid hereunder, Employee shall report all Base
Salary and all other compensation to be paid to Employee hereunder as earned
income for federal, state or local income tax purposes.
6.16 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the respective parties hereto and their heirs, personal
representatives, successors and permitted assigns.
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IN WITNESS WHEREOF, Employer has caused this Agreement to be duly
executed and delivered by its duly authorized officer, and Employee has duly
executed and delivered this Agreement, as of the date first above written, the
parties intending this document to take effect as a sealed instrument.
Employer:
J.L. MANTA, INC.
By:
Name:
Title:
Employee:
John L. Manta
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NOTICE RE: ILLINOIS ACT 83-493
We are required under Illinois Act 83-493 to provide each Employee who,
after January 1, 1984, enters into an employment agreement containing a
provision requiring the Employee to assign any of the Employee's rights and
inventions to the Employer with a written notification to the Employee as
follows:
This Agreement does not apply to an invention for which no equipment,
supplies, facility, or trade secret information of the Employer was
used and which was developed entirely on the Employee's own time,
unless (a) the invention relates (i) to the business of the Employer,
or (ii) to the Employer's actual or demonstrably anticipated research
or development, or (b) the invention results from any work performed by
the Employee for the Employer.
Please acknowledge that you have received a copy of this Notice by
signing this Notice in the space provided hereinbelow.
RECEIPT ACKNOWLEDGED:
Signature
John L. Manta
Printed Name
November , 1997
Date
G:\COMMON\CORP\AGREEMNT\EMPLOYMT\JLMANTA2.JLM
Page 231
EMPLOYMENT AGREEMENT
AGREEMENT made this 18th day of November, 1997, by and between J. L.
MANTA, INC., a corporation duly organized and existing under the laws of the
State of Illinois, with a principal place of business at 5233 Hohman Avenue,
Hammond, Indiana 46320 (hereinafter referred to as "Employer") and Michael J.
Chakos, an individual residing at 645 South Monroe Street, Hinsdale, Illinois
60521 (hereinafter referred to as "Employee").
RECITALS
This Employment Agreement has been executed and delivered pursuant to
the terms and conditions of a certain Stock Purchase Agreement, dated September
30, 1997, by and between, inter alia, EIF Holdings, Inc., an Hawaii corporation
(the "Buyer"), and such "Sellers" named therein (the "Stock Purchase Agreement")
whereby the Buyer has agreed to purchase all of the issued and outstanding
capital stock of the Employer. Capitalized terms used in this Agreement without
definition shall have the respective meanings set forth in the Stock Purchase
Agreement.
The Buyer and the Employer desire to ensure the Employee's continued
employment with the Employer, and the Employee wishes to accept such continued
employment, upon the terms and conditions set forth in this Agreement.
In consideration of the mutual covenants hereinafter set forth, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Employer and Employee hereby agree as follows:
Section 1. Employment.
1.1 Employment. Upon the terms and conditions set forth
herein, Employer hereby employs Employee and Employee accepts such employment.
1.2 Term. The term of the employment shall be for a period of
three (3) year(s) beginning on the date hereof and ending on November 18, 2000
(the "Initial Term of Employment"), and shall continue on an at-will basis
thereafter (collectively, the "Term of Employment"), subject to the provisions
of Section 5 hereinbelow.
1.3 Duties.
(a) Capacity. During the Term of Employment, Employee
shall hold the position of Chief Financial Officer and
Treasurer of the Employer. Employee shall have and perform all
of the duties and responsibilities customarily attributed to
such position and all other services incident thereto and
shall render such other services and discharge such other
responsibilities
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as may be assigned to him from time to time by the Board of
Directors of Employer or such other executive officer as may
be designated by the Board of Directors of Employer; provided,
however, that Employee shall not be required (and it shall not
be a basis for termination for cause hereunder for Employee to
refuse) to render duties of a nature substantially
inconsistent with those customarily performed by officers
holding positions similar to that held by Employee at
companies similar to Employer.
(b) Schedule. In carrying out his duties and
responsibilities hereunder, Employee shall strictly abide by
the policies of Employer and shall devote all of his time,
attention, energies, skills, and best efforts exclusively to
the performance of his duties and responsibilities for and on
behalf of Employer. Without limiting the generality of the
foregoing, Employee shall devote not less than five (5) days
per week (except for regular business holidays observed by
Employer and Employee's vacation days) to his employment and
shall be present on Employer's premises or actively engaged in
service to or on behalf of Employer during normal business
hours Monday through Friday.
(c) Exclusivity. Without limiting the generality of
the foregoing, during the Term of Employment, Employee shall
not, without the prior written approval of Employer, render
services of a business, professional or commercial nature for
compensation to any other entity or person; provided, however,
this clause shall not prohibit Employee from making
investments of a passive nature (other than investments of
more than three (3%) percent of the outstanding shares of
companies engaged in any business which is directly or
indirectly competitive with or similar to the business now or
hereafter conducted by the Employer) which do not detract from
the full-time nature of Employee's employment hereunder.
(d) Relocation. Employer shall not require Employee
to render his duties hereunder from a principal place of
business more than fifty (50) miles from the principal place
of business at which Employee is providing services to
Employer as of the date of the execution of the Stock Purchase
Agreement, unless such relocation of Employee is directed
pursuant to a business plan for Employer adopted in good faith
by Buyer and approved by the President and Chief Executive
Officer of Buyer.
1.4 Compensation and Benefits. During the Term of Employment,
as compensation for the services to be rendered during such period and the other
obligations undertaken by Employee hereunder, Employee shall be entitled to the
following compensation:
(a) Base Salary. Employer agrees to pay or cause to
be paid to Employee for his services a base salary at the rate
of One Hundred Fifty Thousand ($150,000.00) Dollars per year
(the "Initial Base Salary"), payable in accordance with
Employer's normal payroll periods and subject to the usual
payroll deductions. From time to time during the Term of
Employment, the Employer may review and, if appropriate, after
the Initial Period of Employment, adjust the Employee's base
salary in its sole discretion.
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(b) Benefits. During the Term of Employment, Employee
shall be eligible to receive and participate in all other
employment plans and benefits which the Employer customarily
provides its employees in the same or substantially equivalent
positions to that of Employee hereunder, including, without
limitation, paid vacation and holidays, health, life, and
disability insurances, cafeteria plans, medical reimbursement
plans and 401(k) plans, all such plans and benefits to be
substantially comparable to the plans and benefits as made
available to Employee as of the date of the execution of the
Stock Purchase Agreement; provided, however, that nothing
herein shall be construed to in any manner prohibit Employer
from changing the carrier or provider for any such plans or
benefits or from replacing any current plans and benefits with
substantially comparable plans and benefits. All such benefits
shall be governed solely by the terms and conditions of the
applicable employment policies or plans providing for such
benefits. Employer shall further provide to Employee an
automobile (or an equivalent automobile allowance) and
automobile insurance to the extent and in the manner the same
are provided by the Employer to the Employee as of the date of
the execution of the Stock Purchase Agreement.
(c) Expenses. During the Term of Employment, Employer
shall reimburse Employee promptly for reasonable and necessary
travel, lodging, entertainment and other out-of-pocket
expenses in connection with his employment hereunder in
accordance with the policies of Employer in effect from time
to time and upon Employee timely submitting such expenses for
reimbursement and providing the Employer with such
documentation substantiating such expenses as Employer may
reasonably require.
Section 2. Development of Inventions, Improvements or Know-How.
2.1 Information. During the Term of Employment, Employee shall
keep Employer informed of any and all promotional and advertising materials,
catalogs, brochures, plans, customer lists, supplier lists, manuals, handbooks,
inventions, discoveries, improvements, trade secrets, secret processes and any
technology, know-how or intellectual property made or developed by him, in whole
or in part, or conceived of by him, alone or with others, which results from any
work he may do for, or at the request of Employer, or which relates in any way
to the business and/or operations of Employer, or which relates to the
Employer's actual or demonstrably anticipated research or development
(collectively the "Information").
2.2 Assignment of Rights. Employee, and his heirs, assigns and
representatives shall assign, transfer and set over, and do hereby assign,
transfer and set over, to Employer, and its successors and assigns, all of his
and their right, title and interest in and to any and all Information, and any
patents, patent applications, copyrights, trademarks, tradenames or other
intellectual property rights relating thereto, provided or conceived by Employee
during the Term of Employment.
2.3 Further Assurances. To the extent Employer deems
reasonably necessary or desirable to affect the intent of the assignments,
transfers and set-overs provided for in Sections 2.1 and 2.2 hereinabove,
Employee, and his heirs, assigns or representatives, shall, at the expense of
Employer, assist Employer or its nominees to obtain patents, copyrights,
trademarks and tradename or similar rights of protection (including any renewals
or continuations thereof) for any and all Information in any country or
countries throughout the world. Employee, and his heirs, assigns and
representatives shall at Employer's sole cost and expense execute and deliver
any and all applications, assignments or other instruments reasonably necessary
or desirable to secure United States or foreign patents, copyrights, trademarks
and tradenames or similar rights of protection (including any renewals or
continuations thereof), and to transfer to Employer, upon request, any and all
right, title or interest of Employee in and to any and all such Information.
Employee, and his heirs, assigns and representatives shall give Employer, upon
request, any and all facts known to him or them reflecting such Information with
respect to any of the foregoing, including, without limitation, any and all
formulae, processes, sketches, drawings, models and figures.
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Section 3. Non-Disclosure.
Employee hereby acknowledges that Employer possesses certain
confidential and proprietary information, including, but not limited to client
and customer lists, supplier lists, data, figures, sales figures, projections,
estimates, tax records, personnel history, accounting procedures, bids, and
other information relating to the Employer's employees, clients, customers,
client and customer requirements, methods of client development, suppliers,
bidding techniques, pricing, research and development and other activities,
services and business of the Employer (the foregoing being hereinafter referred
to collectively as "Confidential Information") and that maintaining the
confidential and proprietary nature of said Confidential Information is
essential to the continued commercial success of the Employer's business and
that said Confidential Information constitutes valuable and unique assets which
provide the Employer with a distinct competitive advantage over competing
businesses. Confidential Information shall not include any such information
which (a) is or becomes publicly known through no wrongful act of Employee (b)
is approved in advance of such use or disclosure in writing by Employer, or (c)
is required to be disclosed by court order or lawful order of a governmental
agency or regulatory body or by applicable law; provided, however, that in the
event the Employee is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, Employee shall notify Employer promptly of such request or
requirement so that Employer may seek an appropriate protective order or waive
compliance with the provisions of this Section 3. If, in the absence of
protective order or the receipt of a waiver hereunder, Employee is, on the
advice of counsel, compelled or required by applicable law to disclose any
Confidential Information to any tribunal, Employee may disclose the Confidential
Information, provided that Employee shall use his reasonable best efforts to
obtain, at the request and sole expense of Employer, an order or other assurance
that confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Employer shall designate. Therefore,
Employee hereby agrees that Employee shall not disclose, divulge, or use in any
manner any such Confidential Information except as is specifically required
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<PAGE>
in the performance of Employee's duties pursuant to this Employment Agreement,
and that Employee will not, under any circumstances, communicate any such
Confidential Information to any one not employed by the Employer and/or
specifically authorized in writing by the Employer to receive such Confidential
Information. It is expressly agreed that the foregoing restrictions upon use,
disclosure or communication of the aforementioned Confidential Information shall
be in full force and effect forever and shall survive any termination of this
Agreement, whether voluntary or involuntary, and regardless of the reason for or
manner of termination. Upon the termination of this Agreement and Employee's
employment hereunder, regardless of the reason for or manner of termination,
Employee agrees that Employee will deliver to the Employer all originals and all
copies in the Employee's possession of any and all documents of any nature
containing, evidencing, or in any manner relating to any Confidential
Information as defined herein and shall not take any such documentation with
Employee upon said termination. Employer acknowledges and agrees that
notwithstanding the foregoing, Employee shall not be prohibited from utilizing
and disclosing Confidential Information in connection with any action, suit, or
other proceeding arising out of or in connection with the terms and provisions
of the Stock Purchase Agreement and/or the other Buyer's Transaction Documents;
provided, however, that Employee agrees that in connection with any action,
suit, or other proceeding, no such disclosure of the Confidential Information
shall be made until such time as an appropriate protective order, mutually
acceptable to Employer and Employee, shall be entered in any such action, suit,
or proceeding or, in the event the parties cannot mutually agree upon the terms
for such a protective order, upon the issuance of a protective order, upon
motion by either party, as shall be determined to be appropriate by the trier of
facts or arbitrator in any such proceeding.
Section 4. Covenant Not To Compete.
4.1 Acknowledgment. Employee acknowledges that he is being
employed by the Employer in a position in which he will be expected to
independently develop and maintain close relationships with customers and
clients of the Employer and in which he will be provided with access to
Confidential Information of Employer, and that such customer relationships and
Confidential Information constitute a significant part of the goodwill of the
Employer, the preservation of which is essential to the success of the Employer,
and that the Employer has a legitimate interest in restricting Employee's
ability to take advantage of such relationships and Confidential Information.
Employee further acknowledges that the rights, benefits, and privileges which
Employee has received pursuant to the Stock Purchase Agreement constitute
additional consideration for the Employee's covenants as set forth in this
Section 4.
4.2 Non-Competition Agreement.
(a) In light of the foregoing, and in consideration
of the continued employment of Employee hereunder, and for
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by Employee,
Employee hereby covenants and agrees that, during
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the Term of Employment and, except as expressly provided in
Section 4.2(b) hereinbelow, for a period of two (2) years
after any termination of this Employment Agreement and/or
Employee's employment hereunder, whether voluntary or
involuntary, and regardless of the reason for or manner of
termination, Employee shall not, alone or with others,
directly or indirectly (as owner, stockholder, partner,
lender, other investor, director, officer, employee,
consultant, or otherwise):
(i) Solicit, perform or engage in any
business of the same or similar nature to the
business of Employer anywhere within the Employer's
Territories (as hereinafter defined);
(ii) Solicit, engage in, perform, divert or
accept any business of the same or similar nature to
the business of Employer with or from any Customer
(as hereinafter defined) or Potential Customer (as
hereinafter defined) of Employer; or
(iii) Induce or attempt to induce any
Customer to reduce such Customer's business with
Employer or divert such Customer's business from the
Employer, by direct advertising, solicitation or
otherwise;
(iv) Disclose the names of any Customers or
Potential Customers of Employer to any other person,
firm, corporation or other entity which is engaged in
a business of the same or similar nature to the
business of Employer; or
(v) Employ, hire, cause to be employed or
hired, entice away, solicit, or establish a business
with any then current officer, employee, servant or
agent of Employer, or any other person who was
employed by Employer within the twelve (12) months
immediately prior to such employment or
establishment, or in any manner persuade or attempt
to persuade any officer, employee, servant or agent
of Employer to leave the employ of the Employer; or
(vi) Assist any person, firm, entity,
employer, business associate or member of Employee's
family to commit any of the foregoing acts.
(b) Notwithstanding anything to the contrary
contained herein, the terms and provisions of Section 4.2(a)
above shall not apply and shall have no further force or
effect after any termination of this Agreement:
(i) If Employer terminates this Agreement
and Employee's employment hereunder for any reason
other than as specified in Section 5.1(c)
hereinbelow;
(ii) If Employee terminates this Agreement
and Employee's employment hereunder pursuant to
Section 5.1(d) hereof; or
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(iii) In the event that Employer shall
discontinue operating its business (provided,
however, that any sale of the Employer's business,
either through a sale of all or a majority of the
stock of Employer or all or substantially all of the
assets of Employer, shall in no manner and in no
event constitute a discontinuation of the Employer's
business (other than in the context of a liquidation
or other similar circumstance where the business of
the Employer will not be continued or operated by any
third party to which such assets of the Employer have
been transferred).
4.3 Definitions. For purposes of this Section 4, the following
terms shall have the meanings hereinafter set forth:
(i) The term "Customer" shall mean any person, firm,
corporation or other entity or any parent, subsidiary or
affiliate thereof with which Employer has had a contract,
engaged in any business with or for which Employer has
performed any work or services during the twenty-four (24)
months immediately preceding Employee's termination and up to
and including the date of Employee's termination;
(ii) The term "Potential Customer" shall mean any
person, firm, corporation or other entity or any parent,
subsidiary or affiliate thereof from which Employer has
solicited or attempted to solicit any business or to which
Employer has submitted any written or oral proposal within the
twelve (12) months immediately preceding Employee's
termination and up to and including the date of Employee's
termination.
(iii) The term "Employer's Territories" shall mean
any market or geographic area in which Employer has performed
any work or services for any person, firm, corporation, or
other entity during the twenty-four (24) months immediately
preceding Employee's termination and up to and including the
date of Employee's termination and/or any market or geographic
area in which Employer has solicited any work or services from
any person, firm, corporation, or other entity during the
twelve (12) months immediately preceding Employee's
termination and up to and including the date of Employee's
termination.
(iv) The phrase "business of the same or similar
nature to the business of Employer" shall mean the supplying
of products, work or services which have the same or similar
characteristics as, or is competitive with, any products, work
or services engaged in, performed by or rendered by Employer
at the time of the termination of this Agreement and/or within
the twenty-four (24) months immediately preceding such
termination and/or any products, work or services which have
been the subject of any solicitation or proposal by Employer
within the twenty-four (24) months immediately preceding such
termination.
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4.4 Enforcement. The covenants and obligations of Employee
pursuant to this Section 4 shall be specifically enforceable in addition to and
not in limitation of any other legal or equitable remedies, including monetary
damages, which Employer may have. Employee recognizes and acknowledges that
irreparable injury may result to Employer in its business in the event of any
breach by Employee of any covenant or agreement contained herein, and, by reason
of the foregoing, Employee consents and agrees that in the event of any such
breach, Employer shall be entitled, in addition to any other remedies that it
may have, including monetary damages, to an injunction to restrain Employee from
committing or continuing any violation of any covenant or agreement set forth in
this Section 4. It is the intent of the parties hereto that this Agreement
contains covenants which are valid and enforceable, which are reasonable and
necessary to safeguard the interests of Employer and which will be binding upon
Employee. Therefore, in the event that any of the obligations of Employee are
determined to be unreasonable or unenforceable because of the duration of such
provision, the area covered thereby or the scope thereof so as to render any of
the foregoing covenants unenforceable, then such a covenant shall be interpreted
as to require only a reasonable duration, area or scope, and any Court making
any such determination shall have the power to reduce the duration, area or
scope of such provision and/or to delete or revise specific words and phrases,
and, in its reduced or revised form, such provisions shall be enforceable and
shall be enforced.
4.5 Subsequent Employment. After termination of the Employee's
employment with the Employer, regardless of the reason for or manner of
termination, the Employee will, if the covenant under this Section 4 is then in
effect, give notice to the Employer within ten (10) days after accepting any
other employment, of the identity of the Employee's employer. The Buyer or the
Employer may notify such employer that the Employee is bound by this Agreement,
and, at the Employer's election, furnish such employer with a copy of this
Agreement or relevant portions thereof.
Section 5. Termination of Agreement.
5.1. Right to Terminate.
(a) Death. This Agreement shall terminate immediately
upon Employee's death.
(b) Disability. In the event that Employee, become
Disabled, as defined below, unless otherwise prohibited by
applicable law, Employer shall have the right to terminate
Employee's employment hereunder upon five (5) days prior
written notice to Employee. For purposes of this Section 5.1
(b), "Disabled" means that, because of accident, disability,
or physical or mental illness, Employee is incapable of
performing his duties hereunder for either (i) a continuous
period of one hundred twenty (120) days and remains so
incapable at the end of such one hundred twenty (120) day
period; or (ii) periods amounting in the aggregate to one
hundred eighty (180) days within any one period of three
hundred sixty-five (365) days and remains so incapable at the
end of such aggregate period of one hundred eighty (180) days.
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(c) Termination by Employer for Cause. Employer shall
have the right to terminate Employee's employment hereunder
for cause immediately without prior notice to Employee. The
term "cause" shall mean (i) any failure by Employee to perform
any of the material duties assigned to Employee pursuant to
this Agreement, which failure has not been cured within five
(5) days after receipt of written notice from Employer (except
that, in the event of any subsequent failure by Employee to
perform the same or similar material duties as were the
subject of any previous notice given by Employer pursuant
hereto within any twelve (12) month period, no such notice
from the Employer shall be required); (ii) any breach by
Employee of any of the material terms of this Agreement which
breach has not been cured within five (5) days after receipt
of written notice of such breach from Employer (except that,
in the event of any subsequent breach by Employee of the same
or similar material terms of this Agreement as were the
subject of any previous notice given by Employer pursuant
hereto within a twelve (12) month period, no such notice from
the Employer shall be required); or (iii) misappropriation of
any business opportunity; or (iv) fraud, embezzlement or
misappropriation of funds involving assets of the Employer,
its customers, suppliers, or any of their affiliates; or (v)
conviction of Employee of any criminal offense which adversely
affects Employee's ability to perform his duties hereunder or
the reputation of Employer; or (vi) the willful and repeated
breach or habitual neglect by Employee of his material duties
under this Agreement (after the Employee has received at least
one (1) written notice from Employer identifying such willful
and repeated breach or habitual neglect and has been given a
period of at least five (5) days to cease and desist such
conduct); or (vii) Employee making disparaging statements to
third parties or other employees of Employer about the
Employer, its parent, affiliates or subsidiaries or their
business after Employee has received written notice from
Employer identifying such disparaging statements and
requesting that Employee cease making such statements.
(d) Termination by Employee for Cause. Employee shall
have the right to terminate this Agreement hereunder for cause
in the event that: (i) Employer shall fail (other than as the
result of a termination by Employer in accordance with the
terms of this Section 5.1) to provide Employee with his
compensation as agreed upon herein and shall fail to have
cured any such breach within five (5) days after written
notice thereof from Employee to Employer (except that, in the
event of any subsequent failure by Employer to provide
Employee with his compensation as agreed upon herein within
any twelve (12) month period, no such notice from the Employee
shall be required); (ii) either (A) Employer has failed to
make a payment due under the Convertible Promissory Note
issued to the Employee pursuant to the Stock Purchase
Agreement, and such failure constitutes an Event of Default
thereunder, or (B) Employer has failed to make a payment due
under the Employee's Retention Bonus Agreement (as defined in
the Stock Purchase Agreement), and such failure constitutes a
default thereunder, or (iii) after the expiration of the
Initial Period of Employment, Employer reduces the Employee's
Base Salary provided for in Section 1.4(a) above.
Notwithstanding the foregoing, Employee shall not have the
right to terminate this Agreement hereunder for cause pursuant
to Section 5.1(d)(ii) or
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<PAGE>
Section 5.1(d)(iii) above in the event that either: (x) in the
case of a termination pursuant to Section 5.1(d)(ii) above,
Employee has exercised his rights under the Guaranty (as
defined in the Stock Purchase Agreement) of American Eco
Corporation ("American Eco") as a result of the default of the
Employer referenced in Section 5.1(d)(ii)(A) or 5.1(d)(ii)(B)
above, and American Eco has made payment to Employee pursuant
to (and otherwise satisfied its obligations under) the terms
of such Guaranty (as defined in the Stock Purchase Agreement);
or (y) in the case of termination pursuant to either Section
5.1(d)(ii) or Section 5.1(d)(iii) above, the Net Operating
Income of the Employer is less than One Dollar ($1.00) for the
twelve (12) months immediately preceding the date on which
Employee exercises his right to terminate for cause pursuant
to either Section 5.1(d)(ii) or Section 5.1(d)(iii), provided
that Employee shall exercise such right to terminate for cause
pursuant to Section 5.1(d)(ii) or Section 5.1(d)(iii) within
at least thirty (30) days after the date of the occurrence of
the default which is the subject of Employee's right to
terminate. The term "Net Operating Income" means the net
income from operations of Employer before any reduction for
taxes or any allocation of expenses, charges, costs or other
corporate overhead from Buyer determined in accordance with
generally accepted accounting principles applied on a
consistent basis.
(e) Bankruptcy. Employer shall have the right to
terminate this Agreement and Employee's employment hereunder
immediately without prior notice to Employee, in the event of
the bankruptcy, liquidation or reorganization of Employer or
the appointment of a receiver of the assets of Employer
initiated by a creditor of Employer that is not an affiliate
thereof.
(f) Other. Notwithstanding anything to the contrary
contained herein, after the Initial Period of Employment, this
Employment Agreement and Employee's employment with Employer
may be terminated by either party with or without cause at any
time and for any reason.
(g) Rights and Obligations of Employee Upon Termination.
(i) Except for any termination by Employee
pursuant to Section 5.1(d) above (in which event
Employee shall be entitled to exercise any and all
remedies he may have hereunder or otherwise,
including at law or in equity), upon the termination
of Employee's employment pursuant to Section 5.1 of
this Agreement, Employer shall not have any further
obligation to Employee under this Agreement except to
distribute to Employee his Base Salary and other
benefits and expense reimbursement and any earned and
accrued unpaid vacation time due pursuant to Section
1.4 hereof (and accrued vacation pay, if any) up to
the date of termination.
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<PAGE>
(ii) Upon the termination of this Agreement
and Employee's employment hereunder, whether
voluntary or involuntary, and regardless of the
reason for or manner of termination, all of the
obligations of Employee under Sections 2.2, 2.3, 3,
and 4 shall remain in full force and effect and shall
survive the termination of this Agreement to the
extent set forth herein.
Section 6. Miscellaneous.
6.1 Remedies.
(a) Injunctions. Inasmuch as any breach of, or
failure to comply with, this Agreement will cause serious and
substantial damage to both Employer and Employee, if either
party should in any way breach or fail to comply with the
terms of this Agreement, the other party shall be entitled to
an injunction restraining the defaulting party from such
breach or failure.
(b) Cumulative Remedies. All remedies of Employer and
Employee expressly provided for herein are cumulative of any
and all other remedies now existing at law or in equity. Each
of Employer and Employee shall, in addition to the remedies
herein provided, be entitled to avail itself of all such other
remedies as may now or hereafter exist at law or in equity for
compensation, and for the specific enforcement of the
covenants contained herein. Resort to any remedy provided for
hereunder or provided by law shall not prevent the concurrent
or subsequent employment of any other appropriate remedy or
remedies, or preclude the recovery by Employer of monetary
damages.
6.2 Recoupment. The Employer shall be entitled to recoup the
amount of any and all claims that the Buyer may have against the Employee under
the Stock Purchase Agreement by reducing any and all amounts owing to Employee
under this Agreement; provided, however, Employer may only exercise such right
of recoupment hereunder in accordance with the provisions of Section 8(g) of the
Stock Purchase Agreement and then only to the extent that recoupment of the
amount is not then available to Buyer under the Convertible Promissory Notes or
Retention Bonus Agreements (all as defined in the Stock Purchase Agreement).
6.3 Representations and Warranties by the Employee. The
Employee represents and warrants to the Employer that the execution and delivery
by the Employee of this Agreement does not, and the performance by the Employee
of the Employee's obligations hereunder will not, with or without the giving of
notice or the passage of time, or both: (a) violate any judgment, writ,
injunction, or order of any court, arbitrator, or governmental agency applicable
to the Employee; or (b) conflict with, result in the breach of any provisions of
or the termination of, or constitute a default under, any agreement to which the
Employee is a party or by which the Employee is or may be bound.
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<PAGE>
6.4 Obligations Contingent on Performance. The obligations of
each party hereunder, including, but not limited to, the Employer's obligation
to pay Employee the compensation provided for herein, are contingent upon the
other party's performance of its obligations hereunder.
6.5 Amendment. This Agreement may be amended only by a writing duly
executed by the parties hereto.
6.6 Entire Agreement. This Agreement and any other agreements
expressly referred to herein set forth the entire understanding of the parties
hereto regarding the subject matter hereof and supersede all prior contracts,
agreements, arrangements, communications, discussions, representations and
warranties, whether oral or written, between the parties regarding the subject
matter hereof.
6.7 Notice. For purposes of this Agreement, notices and
communications provided or permitted to be given hereunder shall be deemed to
have been given when (i) made by telex, telecopy or facsimile transmission; or
(ii) sent by overnight courier or mailed by United States registered or
certified mail, return receipt requested, postage prepaid to the parties at
their addresses set forth above, or at such other addresses as either may
designate in writing as aforesaid from time to time.
6.8 Assignment. This Agreement is personal as to Employee and
shall not be assignable by Employee. Upon the prior written consent of Employee,
which consent shall not be unreasonably withheld or delayed, Employer may assign
its rights under this Agreement to any person, firm, corporation, or other
entity which may acquire all or substantially all of the business which is now
or hereafter conducted by Employer or which may require substantially all of the
assets of Employer or with or into which Employer may be consolidated or merged,
provided, that any such assignment shall be subject to the express terms and
conditions hereof; provided, however, that if Employee shall refuse to consent
to such assignment under the circumstances set forth herein, then Employer may
terminate this Agreement upon written notice to Employee, and any such
termination shall in no manner affect the obligations of Employee as set forth
in Sections 2, 3, 4.2(a), 4.3, 4.4 and 4.5 which shall all remain in full force
and effect and shall survive such termination of this Agreement by Employer.
6.9 Governing Law. This Agreement shall in all respects be governed
by, and construed in accordance with, the laws of the State of Illinois.
6.10 Severability. Each section and subsection of this
Agreement constitutes a separate and distinct provision hereof. It is the intent
of the parties hereto that the provisions of this Agreement be enforced to the
fullest extent permissible under the laws and public policies applicable in each
jurisdiction in which enforcement is sought. Accordingly, if any provision of
this Agreement shall be adjudicated to be invalid, ineffective or unenforceable,
the remaining provisions shall not be affected thereby. The invalid, ineffective
or unenforceable provisions shall, without further action by the parties, be
automatically amended to affect the original purpose and intent of the invalid,
ineffective and unenforceable provision; provided, however, that such amendment
shall apply only with respect to the operation of such provision in the
particular jurisdiction with respect to which such adjudication is made.
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<PAGE>
6.11 Waiver. The failure of either Employer or Employee to
insist upon strict adherence to any term of this Agreement on any occasion shall
not be construed as a waiver of or deprive Employer or Employee, as the case may
be of the right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any waiver by either Employer or Employee must be
in writing and (i) in the case of a waiver by Employer, signed by a duly
authorized representative of Employer other than Employee or (ii) in the case of
a waiver by Employee, signed by Employee.
6.12 Headings. The headings of this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
6.13 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of which together will constitute one and the same instrument.
6.14 Third Parties. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
or entity other than Employer and Employee any rights or remedies under, or by
reason of, this Agreement.
6.15 Income Tax Reporting. As a condition to Employee's
entitlement to all amounts to be paid hereunder, Employee shall report all Base
Salary and all other compensation to be paid to Employee hereunder as earned
income for federal, state or local income tax purposes.
6.16 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the respective parties hereto and their heirs, personal
representatives, successors and permitted assigns.
IN WITNESS WHEREOF, Employer has caused this Agreement to be duly
executed and delivered by its duly authorized officer, and Employee has duly
executed and delivered this Agreement, as of the date first above written, the
parties intending this document to take effect as a sealed instrument.
Employer: Employee:
J.L. MANTA, INC.
By: ______________________________ ______________________________
Name: Michael J. Chakos
Title:
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<PAGE>
NOTICE RE: ILLINOIS ACT 83-493
We are required under Illinois Act 83-493 to provide each Employee who,
after January 1, 1984, enters into an employment agreement containing a
provision requiring the Employee to assign any of the Employee's rights and
inventions to the Employer with a written notification to the Employee as
follows:
This Agreement does not apply to an invention for which no equipment,
supplies, facility, or trade secret information of the Employer was
used and which was developed entirely on the Employee's own time,
unless (a) the invention relates (i) to the business of the Employer,
or (ii) to the Employer's actual or demonstrably anticipated research
or development, or (b) the invention results from any work performed by
the Employee for the Employer.
Please acknowledge that you have received a copy of this Notice by
signing this Notice in the space provided hereinbelow.
RECEIPT ACKNOWLEDGED:
Signature
Michael J. Chakos
Printed Name
November 18, 1997
Date
g:\common\corp\agreemnt\employmt\jlmanta2.mjc
Page 244
-1-
3309101/RLC
12/03/97
J.L. MANTA, INC.
SECURITY AGREEMENT
The undersigned, J.L. Manta, Inc., an Illinois corporation (the
"Debtor"), with its mailing address as set forth in Section 11(b) hereof, for
value received, hereby grants to HARRIS TRUST AND SAVINGS BANK, an Illinois
banking corporation (the "Secured Party"), with its mailing address as set forth
in Section 11(b) hereof, a lien on and security interest in, and acknowledges
and agrees that the Secured Party has and shall continue to have a continuing
lien on and security interest in, any and all right, title and interest of the
Debtor, whether now owned or existing or hereafter created, acquired or arising,
in and to the following:
(a) Receivables. All Receivables, whether now owned or
existing or hereafter created, acquired or arising, and however
evidenced or acquired, or in which the Debtor now has or hereafter
acquires any rights (the term "Receivables" means and includes all
accounts, accounts receivable, contract rights, instruments, notes,
drafts, acceptances, documents, chattel paper, and all other forms of
obligations owing to the Debtor, any right of the Debtor to payment for
goods sold or leased or for services rendered, whether or not earned by
performance, and all of the Debtor's rights to any merchandise and
other goods (including, without limitation, any returned or repossessed
goods and the right of stoppage in transit) which is represented by,
arises from or is related to any of the foregoing);
(b) General Intangibles. All General Intangibles, whether now
owned or existing or hereafter created, acquired or arising, or in
which the Debtor now has or hereafter acquires any rights (the term
"General Intangibles" means and includes all general intangibles,
patents, patent applications, patent licenses, trademarks, trademark
registrations, trademark licenses, trade styles, trade names,
copyrights, copyright registrations, copyright licenses and other
licenses and similar intangibles, all customer, client and supplier
lists (in whatever form maintained), all rights in leases and other
agreements relating to real or personal property, all causes of action
and tax refunds of every kind and nature, all privileges, franchises,
immunities, licenses, permits and similar intangibles, all rights to
receive payments in connection with the termination of any pension plan
or employee stock ownership plan or trust established for the benefit
of employees of the Debtor, and all other personal property (including
things in action) not otherwise covered by this Security Agreement);
(c) Inventory. All Inventory, whether now owned or existing or hereafter
created, acquired or arising, or in which the Debtor now has or hereafter
acquires any rights, and all documents
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of title at any time evidencing or representing any part thereof (the
term "Inventory" means and includes all inventory and any other goods
which are held for sale or lease or are to be furnished under contracts
of service or consumed in the Debtor's business, all goods which are
raw materials, work-in-process or finished goods, all goods which are
returned or repossessed goods, and all materials and supplies of every
kind and nature used or usable in connection with the acquisition,
manufacture, processing, supply, servicing, storing, packing, shipping,
advertising, selling, leasing or furnishing of the foregoing, and any
constituents or ingredients thereof);
(d) Equipment. All Equipment, whether now owned or existing
or hereafter created, acquired or arising, or in which the Debtor now
has or hereafter acquires any rights (the term "Equipment" means and
includes all equipment and any other machinery, tools, fixtures, trade
fixtures, furniture, furnishings, office equipment, vehicles (including
vehicles subject to a certificate of title law), and all other goods
now or hereafter used or usable in connection with the Debtor's
business, together with all parts, accessories and attachments relating
to any of the foregoing), except for any Equipment described on
Schedule E attached hereto;
(e) Investment Property. All Investment Property, whether now
owned or existing or hereafter created, acquired or arising, or in
which the Debtor now has or hereafter acquires any rights (the term
"Investment Property" means and includes all investment property and
any other securities (whether certificated or uncertificated), security
entitlements, securities accounts, commodity contracts and commodity
accounts, including all substitutions and additions thereto, all
dividends, distributions and sums distributable or payable from, upon,
or in respect of such property, and all rights and privileges incident
to such property);
(f) Deposits and Property in Possession. All deposit accounts
(whether general, special or otherwise) of the Debtor maintained with
the Secured Party and all sums now or hereafter on deposit therein or
payable thereon, and all other personal property and interests in
personal property of the Debtor of any kind or description now held by
the Secured Party or at any time hereafter transferred or delivered to,
or coming into the possession, custody or control of, the Secured
Party, or any agent or affiliate of the Secured Party, whether
expressly as collateral security or for any other purpose (whether for
safekeeping, custody, collection or otherwise), and all dividends and
distributions on or other rights in connection with any such property,
in each case whether now owned or existing or hereafter created,
acquired or arising;
(g) Records. All supporting evidence and documents relating
to any of the above-described property, whether now owned or existing
or hereafter created, acquired or arising, including, without
limitation, computer programs, disks, tapes and related electronic data
processing media, and all rights of the Debtor to retrieve the same
from third parties, written applications, credit information, account
cards, payment records, correspondence, delivery and installation
certificates, invoice copies, delivery receipts, notes and other
evidences of indebtedness, insurance certificates and the like,
together with all books of account, ledgers and cabinets in which the
same are reflected or maintained;
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(h) Accessions and Additions. All accessions and additions to, and
substitutions and replacements of, any and all of the foregoing, whether now
owned or existing or hereafter created, acquired or arising; and
(i) Proceeds and Products. All proceeds and products of the
foregoing and all insurance of the foregoing and proceeds thereof,
whether now owned or existing or hereafter created, acquired or
arising;
all of the foregoing being herein sometimes referred to as the "Collateral". All
terms which are used in this Security Agreement which are defined in the Uniform
Commercial Code of the State of Illinois ("UCC") shall have the same meanings
herein as such terms are defined in the UCC, unless this Security Agreement
shall otherwise specifically provide.
1. Obligations Hereby Secured. The lien and security interest herein
granted and provided for is made and given to secure, and shall secure, the
payment and performance of (a) any and all indebtedness, obligations and
liabilities of whatsoever kind and nature of the Debtor to the Secured Party
(whether arising before or after the filing of a petition in bankruptcy),
whether direct or indirect, absolute or contingent, due or to become due, and
whether now existing or hereafter arising and howsoever held, evidenced or
acquired, and whether several, joint or joint and several and (b) any and all
reasonable expenses and charges, legal or otherwise, suffered or incurred by the
Secured Party in collecting or enforcing any of such indebtedness, obligations
or liabilities or in realizing on or protecting or preserving any security
therefor, including, without limitation, the lien and security interest granted
hereby (all of the foregoing being hereinafter referred to as the
"Obligations").
2. Covenants, Agreements, Representations and Warranties. The Debtor
hereby covenants and agrees with, and represents and warrants to, the Secured
Party that:
(a) The Debtor is a corporation duly organized and validly existing
in good standing under the laws of the State of Illinois, is the sole and lawful
owner of the Collateral, and has full right, power and authority to enter into
this Security Agreement and to perform each and all of the matters and things
herein provided for. The execution and delivery of this Security Agreement, and
the observance and performance of each of the matters
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and things herein set forth, will not (i) contravene or constitute a default
under any provision of law or any judgment, injunction, order or decree binding
upon the Debtor or any provision of the Debtor's charter, articles of
incorporation or by-laws or any covenant, indenture or agreement of or affecting
the Debtor or any of its property or (ii) result in the creation or imposition
of any lien or encumbrance on any property of the Debtor except for the lien and
security interest granted to the Secured Party hereunder. The Debtor's Federal
tax identification number is 36-2072055.
(b) The Debtor's chief executive office and principal place of
business is at, and the Debtor keeps and shall keep all of its books and records
relating to Receivables only at, 5233 Hohman, Hammond, Indiana 46320; and the
Debtor has no other executive offices or places of business other than those
listed under Item 1 on Schedule A. The Collateral is and shall remain in the
Debtor's possession or control at the locations listed under Item 2 on Schedule
A attached hereto (collectively, the "Permitted Collateral Locations"), except
for (i) Collateral which in the ordinary course of the Debtor's business is in
transit between Permitted Collateral Locations, (ii) in use at job sites, and
(iii) Collateral aggregating less than $50,000 in fair market value outstanding
at any one time. If for any reason any Collateral is at any time kept or located
at a location other than a Permitted Collateral Location, the Secured Party
shall nevertheless have and retain a lien on and security interest therein. The
Debtor owns and shall at all times own all Permitted Collateral Locations,
except the extent otherwise disclosed under Item 2 on Schedule A. The Debtor
shall not move its chief executive office or maintain a place of business at a
location other than those specified under Item 1 on Schedule A or permit the
Collateral to be located at a location other than those specified under Item 2
on Schedule A, in each case without first providing the Secured Party 30 days'
prior written notice of the Debtor's intent to do so; provided that the Debtor
shall at all times maintain its chief executive office and, unless otherwise
specifically agreed to in writing by the Secured Party, Permitted Collateral
Locations in the United States of America and, with respect to any new chief
executive office or place of business or location of Collateral, the Debtor
shall have taken all action reasonably requested by the Secured Party to
maintain the lien and security interest of the Secured Party in the Collateral
at all times fully perfected and in full force and effect.
(c) The Debtor has not invoiced Receivables or otherwise transacted
business at any time during the immediately preceding five-year period, and does
not currently invoice Receivables or otherwise transact business, under any
trade names other than (i) the Debtor's name set forth in the introductory
paragraph of this Security Agreement and (ii) the trade names set forth on
Schedule B attached hereto. The Debtor shall not change its name or transact
business under any other trade name without first giving 30 days' prior written
notice of its intent to do so to the Secured Party.
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(d) The Collateral and every part thereof is and shall be free and
clear of all security interests, liens (including, without limitation,
mechanics', laborers' and statutory liens), attachments, levies and encumbrances
of every kind, nature and description, whether voluntary or involuntary, except
for the lien and security interest of the Secured Party therein and as otherwise
provided on Schedule C attached hereto. The Debtor shall warrant and defend the
Collateral against any claims and demands of all persons at any time claiming
the same or any interest in the Collateral adverse to the Secured Party.
(e) The Debtor shall promptly pay when due all taxes, assessments and
governmental charges and levies upon or against the Debtor or any of the
Collateral, in each case before the same become delinquent and before penalties
accrue thereon, unless and to the extent that the same are being contested in
good faith by appropriate proceedings which prevent foreclosure or other
realization upon any of the Collateral and preclude interference with the
operation of the Debtor's business in the ordinary course, and the Debtor shall
have established adequate reserves therefor.
(f) The Debtor shall not use, manufacture, sell or distribute any
Collateral in violation of any statute, ordinance or other governmental
requirement. The Debtor shall not waste or destroy the Collateral or any part
thereof or be negligent in the care or use of any Collateral. The Debtor shall
perform in all material respects its obligations under any contract or other
agreement constituting part of the Collateral, it being understood and agreed
that the Secured Party has no responsibility to perform such obligations.
(g) Subject to Sections 3(b), 5(b), 5(c), and 6(c) hereof, the Debtor
shall not, without the Secured Party's prior written consent, sell, assign,
mortgage, lease or otherwise dispose of the Collateral or any interest therein.
(h) The Debtor shall at all times insure the Collateral consisting of
tangible personal property against such risks and hazards as other persons
similarly situated insure against, and including in any event loss or damage by
fire, theft, burglary, pilferage, loss in transit and such other hazards as the
Secured Party may reasonably specify. All insurance required hereby shall be
maintained in amounts and under policies and with insurers reasonably acceptable
to the Secured Party, and all such policies shall contain loss payable clauses
naming the Secured Party as loss payee as its interest may appear (and, if the
Secured Party requests, naming the Secured Party as an additional insured
therein) in a form reasonably acceptable to the Secured Party. All premiums on
such insurance shall be paid by the Debtor. Certificates of insurance evidencing
compliance with the foregoing and, at the Secured Party's request, the policies
of such insurance shall be delivered by the Debtor to the Secured Party. All
insurance required hereby shall provide that any loss shall be payable to the
Secured Party notwithstanding any act or negligence of the Debtor, shall provide
that no cancellation thereof shall be effective until at least 30 days after
receipt by the Debtor and the Secured Party of written notice thereof, and shall
be reasonably satisfactory to the Secured Party in all other respects. In case
of any loss, damage to or destruction of the Collateral or any part thereof
having a value in excess of $50,000, the Debtor shall promptly give written
notice thereof to the Secured Party generally describing the nature and extent
of such damage or destruction. In case of any loss, damage to or destruction of
the Collateral or any part thereof, the Debtor, whether or not the insurance
proceeds, if any, received on account of such damage or destruction shall be
sufficient for that purpose, at the Debtor's cost and expense, shall promptly
repair or replace the Collateral so lost, damaged or destroyed, except to the
extent such Collateral, prior to its loss, damage or destruction, had become
uneconomical, obsolete or worn out and is not necessary for or of importance to
the proper conduct of the Debtor's business in the ordinary course. In the event
the Debtor shall receive any proceeds of such insurance, the Debtor shall
immediately pay over such proceeds to the Secured Party to be held as Collateral
hereunder. The
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Debtor hereby authorizes the Secured Party, at the Secured Party's option, to
adjust, compromise and settle in good faith any losses under any insurance
afforded at any time during the existence of any Event of Default or any other
event or condition which with the lapse of time or the giving of notice, or
both, would constitute an Event of Default, and the Debtor does hereby
irrevocably constitute the Secured Party, and each of its nominees, officers,
agents, attorneys, and any other person whom the Secured Party may designate, as
the Debtor's attorneys-in-fact, with full power and authority to effect such
adjustment, compromise and/or settlement and to endorse any drafts drawn by an
insurer of the Collateral or any part thereof and to do everything necessary to
carry out such purposes and to receive and receipt for any unearned premiums due
under policies of such insurance. Unless the Secured Party elects to adjust,
compromise or settle losses as aforesaid, any adjustment, compromise and/or
settlement of any losses under any insurance shall be made by the Debtor subject
to final approval of the Secured Party (regardless of whether or not an Event of
Default shall have occurred) in the case of losses exceeding $50,000. Net
insurance proceeds received by the Secured Party under the provisions hereof or
under any policy of insurance covering the Collateral or any part thereof shall
be applied to the reduction of the Obligations (whether or not then due);
provided, however, that the Secured Party may in its sole discretion release any
or all such insurance proceeds to the Debtor. All insurance proceeds shall be
subject to the lien and security interest of the Secured Party hereunder.
UNLESS THE DEBTOR PROVIDES THE SECURED PARTY WITH EVIDENCE OF THE
INSURANCE COVERAGE REQUIRED BY THIS SECURITY AGREEMENT, THE SECURED PARTY MAY
PURCHASE INSURANCE AT THE DEBTOR'S EXPENSE TO PROTECT THE SECURED PARTY'S
INTERESTS IN THE COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT THE
DEBTOR'S INTERESTS IN THE COLLATERAL. THE COVERAGE PURCHASED BY THE SECURED
PARTY MAY NOT PAY ANY CLAIMS THAT THE DEBTOR MAKES OR ANY CLAIM THAT IS MADE
AGAINST THE DEBTOR IN CONNECTION WITH THE COLLATERAL. THE DEBTOR MAY LATER
CANCEL ANY SUCH INSURANCE PURCHASED BY THE SECURED PARTY, BUT ONLY AFTER
PROVIDING THE SECURED PARTY WITH EVIDENCE THAT THE DEBTOR HAS OBTAINED INSURANCE
AS REQUIRED BY THIS SECURITY AGREEMENT. IF THE SECURED PARTY PURCHASES INSURANCE
FOR THE COLLATERAL, THE DEBTOR WILL BE RESPONSIBLE FOR THE COSTS OF THAT
INSURANCE, INCLUDING INTEREST AND ANY
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OTHER REASONABLE CHARGES THAT THE SECURED PARTY MAY IMPOSE IN CONNECTION WITH
THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR
EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO THE
OBLIGATIONS SECURED HEREBY. THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST
OF INSURANCE THE DEBTOR MAY BE ABLE TO OBTAIN ON ITS OWN.
(i) The Debtor shall at all times allow the Secured Party and its
representatives free access to and right of inspection of the Collateral,
provided that, unless an Event of Default has occurred and is continuing, any
such access or inspection shall only be required during normal business hours.
(j) If any Collateral is in the possession or control of any of the
Debtor's agents or processors and the Secured Party so requests, the Debtor
agrees to notify such agents or processors in writing of the Secured Party's
security interest therein and instruct them to hold all such Collateral for the
Secured Party's account and subject to the Secured Party's instructions. The
Debtor shall, upon the request of the Secured Party, authorize and instruct all
bailees and other parties, if any, at any time processing, labeling, packaging,
holding, storing, shipping or transferring all or any part of the Collateral to
permit the Secured Party and its representatives to examine and inspect any of
the Collateral then in such party's possession and to verify from such party's
own books and records any information concerning the Collateral or any part
thereof which the Secured Party or its representatives may seek to verify. As to
any premises not owned by the Debtor wherein any of the Collateral is located,
the Debtor shall, at Secured Party's request, cause each party having any right,
title or interest in, or lien on, any of such premises to enter into an
agreement (any such agreement to contain a legal description of such premises)
whereby such party disclaims any right, title and interest in, and lien on, the
Collateral and allows the removal of such Collateral by the Secured Party at any
time during the existence of an Event of Default and is otherwise in form and
substance acceptable to the Secured Party; provided, however, that no such
landlord agreement need be obtained with respect to any one location wherein the
value of the Collateral as to which such agreement has not been obtained
aggregates less than $50,000 at any one time.
(k) The Debtor agrees from time to time to deliver to the Secured
Party such evidence of the existence, identity and location of the Collateral
and of its availability as collateral security pursuant hereto (including,
without limitation, schedules describing all Receivables created or acquired by
the Debtor, copies of customer invoices or the equivalent and original shipping
or delivery receipts for all merchandise and other goods sold or leased or
services rendered, together with the Debtor's warranty of the genuineness
thereof, and
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reports stating the book value of Inventory and Equipment by major category and
location), in each case as the Secured Party may reasonably request and, absent
the existence of a continuing Event of Default, not more frequently than four
times during any 12-month period (if an Event of Default exists, such reports
shall be delivered to the Secured Party at such times and with such frequency as
Secured Party may reasonably request). The Secured Party shall have the right to
verify all or any part of the Collateral in any manner, and through any medium,
which the Secured Party considers appropriate (including, without limitation,
the verification of Collateral by use of a fictitious name), and the Debtor
agrees to furnish all assistance and information, and perform any acts, which
the Secured Party may require in connection therewith. The Debtor shall promptly
notify the Secured Party of any Collateral which the Debtor has determined to
have been rendered obsolete, stating the prior book value of such Collateral,
its type and location.
(l) The Debtor shall comply in all material respects with the terms
and conditions of all leases, easements, right-of-way agreements and other
similar agreements binding upon the Debtor or affecting the Collateral or any
part thereof, and all orders, ordinances, laws and statutes of any city, state
or other governmental entity, department or agency having jurisdiction with
respect to the premises wherein such Collateral is located or the conduct of
business thereon.
(m) The Debtor agrees to execute and deliver to the Secured Party
such further agreements, assignments, instruments and documents and to do all
such other things as the Secured Party may deem necessary or appropriate to
assure the Secured Party its lien and security interest hereunder, including
such financing statements, and amendments thereof or supplements thereto, and
such other instruments and documents as the Secured Party may from time to time
require in order to comply with the UCC. The Debtor hereby agrees that a carbon,
photographic or other reproduction of this Security Agreement or any such
financing statement is sufficient for filing as a financing statement by the
Secured Party without notice thereof to the Debtor wherever the Secured Party in
its sole discretion desires to file the same. In the event for any reason the
law of any jurisdiction other than Illinois becomes or is applicable to the
Collateral or any part thereof, or to any of the Obligations, the Debtor agrees
to execute and deliver all such instruments and documents and to do all such
other things as the Secured Party in its sole discretion deems necessary or
appropriate to preserve, protect and enforce the lien and security interest of
the Secured Party under the law of such other jurisdiction. The Debtor agrees to
mark its books and records to reflect the lien and security interest of the
Secured Party in the Collateral.
(n) On failure of the Debtor to perform any of the covenants and
agreements herein contained, after giving effect to any applicable notice or
cure periods, the Secured Party may, at its option, perform the same and in so
doing may expend such sums as the Secured Party may deem advisable in the
performance thereof, including, without limitation, the payment of any insurance
premiums, the payment of any taxes, liens and
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encumbrances, expenditures made in defending against any adverse claims, and all
other expenditures which the Secured Party may be compelled to make by operation
of law or which the Secured Party may make by agreement or otherwise for the
protection of the security hereof. All such sums and amounts so expended shall
be repayable by the Debtor immediately without notice or demand, shall
constitute additional Obligations secured hereunder and shall bear interest from
the date said amounts are expended at the rate per annum (computed on the basis
of a 360-day year for the actual number of days elapsed) determined by adding 3%
to the rate per annum from time to time announced by Harris Trust and Savings
Bank as its prime commercial rate with any change in such rate per annum as so
determined by reason of a change in such prime commercial rate to be effective
on the date of such change in said prime commercial rate (such rate per annum as
so determined being hereinafter referred to as the "Default Rate"). No such
performance of any covenant or agreement by the Secured Party on behalf of the
Debtor, and no such advancement or expenditure therefor, shall relieve the
Debtor of any default under the terms of this Security Agreement or in any way
obligate the Secured Party to take any further or future action with respect
thereto. The Secured Party, in making any payment hereby authorized, may do so
according to any bill, statement or estimate procured from the appropriate
public office or holder of the claim to be discharged without inquiry into the
accuracy of such bill, statement or estimate or into the validity of any tax
assessment, sale, forfeiture, tax lien or title or claim. The Secured Party, in
performing any act hereunder, shall be the sole judge of whether the Debtor is
required to perform same under the terms of this Security Agreement. The Secured
Party is hereby authorized to charge any depository or other account of the
Debtor maintained with the Secured Party for the amount of such sums and amounts
so expended.
3. Special Provisions Re: Receivables.
(a) As of the time any Receivable becomes subject to the security
interest provided for hereby, and at all times thereafter, the Debtor shall be
deemed to have warranted as to each and all of such Receivables that all
warranties of the Debtor set forth in this Security Agreement are true and
correct with respect to each such Receivable; that each Receivable and all
papers and documents relating thereto are genuine and in all respects what they
purport to be; that each Receivable is valid and subsisting and, if such
Receivable is an account, arises out of a bona fide sale of goods sold and
delivered by the Debtor to, or in the process of being delivered to, or out of
and for services theretofore actually rendered by the Debtor to, the account
debtor named therein; that no such Receivable is evidenced by any instrument or
chattel paper unless such instrument or chattel paper has theretofore been
endorsed by the Debtor and delivered to the Secured Party (except that, prior to
the occurrence of an Event of Default and thereafter until otherwise notified by
the Secured Party, the Debtor will not be required to endorse and deliver to the
Secured Party any such instrument or chattel paper if and only so
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long as the aggregate outstanding balance of all such instruments and chattel
paper not so endorsed and delivered to the Secured Party hereunder is less than
$50,000 at any one time outstanding); that the amount of the Receivable
represented as owing is the correct amount actually and unconditionally owing,
except for normal cash discounts on normal trade terms in the ordinary course of
business if such Receivable is an account; and that the amount of such
Receivable represented as owing is not disputed and is not subject to any
set-offs, credits, deductions or countercharges other than those arising in the
ordinary course of the Debtor's business which are disclosed to the Secured
Party in writing promptly upon the Debtor becoming aware thereof. Without
limiting the foregoing, if any Receivable arises out of a contract with the
United States of America, or any state or political subdivision thereof, or any
department, agency or instrumentality of any of the foregoing, the Debtor agrees
to notify the Secured Party and, at the Secured Party's request, execute
whatever instruments and documents are required by the Secured Party in order
that such Receivable shall be assigned to the Secured Party and that proper
notice of such assignment shall be given under the federal Assignment of Claims
Act (or any successor statute) or any similar state or local statute, as the
case may be.
(b) Unless and until an Event of Default occurs, any merchandise or
other goods which are returned by a customer or account debtor or otherwise
recovered may be resold by the Debtor in the ordinary course of its business as
presently conducted in accordance with Section 5(b) hereof; and, during the
existence of any Event of Default, such merchandise and other goods shall be set
aside at the request of the Secured Party and held by the Debtor as trustee for
the Secured Party and shall remain part of the Secured Party's Collateral.
Unless and until an Event of Default occurs, the Debtor may settle and adjust
disputes and claims with its customers and account debtors, handle returns and
recoveries and grant discounts, credits and allowances in the ordinary course of
its business as presently conducted for amounts and on terms which the Debtor in
good faith considers advisable; and, during the existence of any Event of
Default, unless the Secured Party requests otherwise, the Debtor shall notify
the Secured Party promptly of all returns and recoveries and, on the Secured
Party's request, deliver any such merchandise or other goods to the Secured
Party. During the existence of any Event of Default, unless the Secured Party
requests otherwise, the Debtor shall also notify the Secured Party promptly of
all disputes and claims and settle or adjust them at no expense to the Secured
Party, but no discount, credit or allowance other than on normal trade terms in
the ordinary course of business as presently conducted shall be granted to any
customer or account debtor and no returns of merchandise or other goods shall be
accepted by the Debtor without the Secured Party's consent. The Secured Party
may, at all times during the existence of any Event of Default, settle or adjust
disputes and claims directly with customers or account debtors for amounts and
upon terms which the Secured Party considers advisable.
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4. Collection of Receivables.
(a) Except as otherwise provided in this Security Agreement, the
Debtor shall make collection of all Receivables and may use the same to carry on
its business in accordance with sound business practice and otherwise subject to
the terms hereof.
(b) Whether or not any Event of Default has occurred and whether or
not the Secured Party has exercised any or all of its rights under other
provisions of this Section 4, in the event the Secured Party requests the Debtor
to do so:
(i) all instruments and chattel paper at any time
constituting part of the Receivables or any other Collateral (including
any postdated checks) shall, upon receipt by the Debtor, be immediately
endorsed to and deposited with the Secured Party; and/or
(ii) the Debtor shall instruct all customers and account
debtors to remit all payments in respect of Receivables or any other
Collateral to a lockbox or lockboxes under the sole custody and control
of the Secured Party and which are maintained at post office(s) in
Chicago, Illinois selected by the Secured Party.
(c) Upon the occurrence of any Event of Default or of any event or
condition which with the lapse of time or the giving of notice, or both, would
constitute an Event of Default, whether or not the Secured Party has exercised
any or all of its rights under other provisions of this Section 4, the Secured
Party or its designee may notify the Debtor's customers and account debtors at
any time that Receivables or any other Collateral have been assigned to the
Secured Party or of the Secured Party's security interest therein, and either in
its own name, or the Debtor's name, or both, demand, collect (including, without
limitation, through a lockbox analogous to that described in Section 4(b)(ii)
hereof), receive, receipt for, sue for, compound and give acquittance for any or
all amounts due or to become due on Receivables or any other Collateral, and in
the Secured Party's discretion file any claim or take any other action or
proceeding which the Secured Party may deem reasonably necessary or appropriate
to protect or realize upon the security interest of the Secured Party in the
Receivables or any other Collateral.
(d) Any proceeds of Receivables or other Collateral transmitted to or
otherwise received by the Secured Party pursuant to any of the provisions of
Sections 4(b) or 4(c) hereof may be handled and administered by the Secured
Party in and through a remittance account at the Secured Party, and the Debtor
acknowledges that the maintenance of such remittance account by the Secured
Party is solely for the Secured Party's convenience and that the Debtor does not
have any right, title or interest in such remittance account or any amounts at
any time standing to the credit thereof. The Secured Party may, after the
occurrence and during the continuation of any Event of Default or of any event
or condition which with the lapse of time or the giving of notice, or both,
would constitute an Event of Default, apply all or any part of any proceeds of
Receivables or other Collateral
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received by it from any source to the payment of the Obligations (whether or not
then due and payable), such applications to be made in such amounts, in such
manner and order and at such intervals as the Secured Party may from time to
time in its discretion determine, but not less often than once each week. The
Secured Party need not apply or give credit for any item included in proceeds of
Receivables or other Collateral until the Secured Party has received final
payment therefor at its office in cash or final solvent credits current in
Chicago, Illinois, acceptable to the Secured Party as such. However, if the
Secured Party does give credit for any item prior to receiving final payment
therefor and the Secured Party fails to receive such final payment or an item is
charged back to the Secured Party for any reason, the Secured Party may at its
election in either instance charge the amount of such item back against the
remittance account or any depository account of the Debtor maintained with the
Secured Party, together with interest thereon at the Default Rate. Concurrently
with each transmission of any proceeds of Receivables or other Collateral to the
remittance account, the Debtor shall furnish the Secured Party with a report in
such form as the Secured Party shall reasonably require identifying the
particular Receivable or other Collateral from which the same arises or relates.
Unless and until an Event of Default or an event or condition which with the
lapse of time or the giving of notice, or both, would constitute an Event of
Default shall have occurred and be continuing, the Secured Party will release
proceeds of Collateral which the Secured Party has not applied to the
Obligations as provided above from the remittance account from time to time, but
not less often than once per week. The Debtor hereby indemnifies the Secured
Party from and against all liabilities, damages, losses, actions, claims,
judgments, costs, expenses, charges and reasonable attorneys' fees suffered or
incurred by the Secured Party because of the maintenance of the foregoing
arrangements; provided, however, that the Debtor shall not be required to
indemnify the Secured Party for any of the foregoing to the extent they arise
solely from the gross negligence or willful misconduct of the Secured Party. The
Secured Party shall have no liability or responsibility to the Debtor for
accepting any check, draft or other order for payment of money bearing the
legend "payment in full" or words of similar import or any other restrictive
legend or endorsement whatsoever or be responsible for determining the
correctness of any remittance.
5. Special Provisions Re: Inventory and Equipment.
(a) The Debtor shall at its own cost and expense maintain, keep and
preserve the Inventory in good and merchantable condition and keep and preserve
the Equipment in good repair, working order and condition, ordinary wear and
tear excepted, and, without limiting the foregoing, make all necessary and
proper repairs, replacements and additions to the Equipment so that the
efficiency thereof shall be fully preserved and maintained.
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(b) The Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Secured Party, use,
consume and sell the Inventory in the ordinary course of its business, but a
sale in the ordinary course of business shall not under any circumstance include
any transfer or sale in satisfaction, partial or complete, of a debt owing by
the Debtor.
(c) The Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Secured Party, sell
(i) obsolete, worn out or unusable Equipment which is concurrently replaced with
similar Equipment at least equal in quality and condition to that sold and owned
by the Debtor free of any lien, charge or encumbrance other than the security
interest granted hereby and (ii) Equipment which is not necessary for or of
importance to the proper conduct of the Debtor's business in the ordinary course
which, when taken together with all other Equipment not repaired or replaced
pursuant to the terms of this Security Agreement during the immediately
preceding 12 months, has an aggregate fair market value of less than $50,000.
(d) As of the time any Inventory or Equipment becomes subject to the
security interest provided for hereby and at all times thereafter, the Debtor
shall be deemed to have warranted as to any and all of such Inventory and
Equipment that all warranties of the Debtor set forth in this Security Agreement
are true and correct with respect to such Inventory and Equipment; that all of
such Inventory and Equipment is located at a location set forth pursuant to
Section 2(b) hereof; and that, in the case of Inventory, such Inventory is new
and unused and in good and merchantable condition. The Debtor warrants and
agrees that no Inventory is or will be consigned to any other person without the
Secured Party's prior written consent.
(e) Unless the Secured Party requests otherwise, the Debtor shall at
its own cost and expense cause the lien of the Secured Party in and to any
portion of the Collateral subject to a certificate of title law to be duly noted
on such certificate of title or to be otherwise filed in such manner as is
prescribed by law in order to perfect such lien and shall cause all such
certificates of title and evidences of lien to be deposited with the Secured
Party.
(f) Except for Equipment from time to time located on the real estate
described on Schedule D attached hereto and as otherwise disclosed to the
Secured Party in writing, none of the Equipment is or will be attached to real
estate in such a manner that the same may become a fixture.
(g) If any of the Inventory is at any time evidenced by a document of
title, such document shall be promptly delivered by the Debtor to the Secured
Party except to the extent the Secured Party specifically requests the Debtor
not to do so with respect to any such document.
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Section 6. Special Provisions Re: Investment Property.
(a) Unless and until an Event of Default has occurred and is
continuing and thereafter until notified to the contrary by the Secured Party
pursuant to Section 8(d) hereof:
(i) The Debtor shall be entitled to exercise all voting
and/or consensual powers pertaining to the Investment Property or any
part thereof, for all purposes not inconsistent with the terms of this
Security Agreement or any other document evidencing or otherwise
relating to any Obligations; and
(ii) The Debtor shall be entitled to receive and retain all
cash dividends paid upon or in respect of the Investment Property.
(b) At the Secured Party's request, certificates for all securities
now or at any time constituting Investment Property individually having a value
of $50,000 or more or which in the aggregate have a value of $200,000 or more
shall be promptly delivered by the Debtor to the Secured Party duly endorsed in
blank for transfer or accompanied by an appropriate assignment or assignments or
an appropriate undated stock power or powers, in every case sufficient to
transfer title thereto including, without limitation, all stock received in
respect of a stock dividend or resulting from a split-up, revision or
reclassification of the Investment Property or any part thereof or received in
addition to, in substitution of or in exchange for the Investment Property or
any part thereof as a result of a merger, consolidation or otherwise. With
respect to any Investment Property held by a securities intermediary, commodity
intermediary, or other financial intermediary of any kind, at the Secured
Party's request, the Debtor shall execute and deliver, and shall cause any such
intermediary to execute and deliver, an agreement among the Debtor, the Secured
Party, and such intermediary in form and substance reasonably satisfactory to
the Secured Party which provides, among other things, for the intermediary's
agreement that it shall comply with such entitlement orders, and apply any value
distributed on account of any Investment Property maintained in an account with
such intermediary, as directed by the Secured Party without further consent by
the Debtor at any time after the occurrence and during the continuation of any
Event of Default. The Secured Party may at any time, after the occurrence of an
Event of Default or an event or condition which with the lapse of time or the
giving of notice, or both, would constitute an Event of Default, cause to be
transferred into its name or the name of its nominee or nominees all or any part
of the Investment Property hereunder.
(c) Unless and until an Event of Default, or an event or condition
which with the lapse of time or the giving of notice, or both, would constitute
an Event of Default, has occurred and is continuing, the Debtor may sell or
otherwise dispose of any Investment Property, provided that the Debtor shall not
sell or otherwise dispose of any capital stock of any direct or indirect
subsidiary without the prior written consent of the Secured Party. After the
occurrence and during the continuation of any Event of Default or of any event
or
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condition which with the lapse of time or the giving of notice, or both, would
constitute an Event of Default, the Debtor shall not sell all or any part of the
Investment Property without the prior written consent of the Secured Party.
(d) The Debtor represents that on the date of this Security
Agreement, none of the Investment Property consists of margin stock (as such
term is defined in Regulation U of the Board of Governors of the Federal Reserve
System) except to the extent the Debtor has delivered to the Secured Party a
duly executed and completed Form U-1 with respect to such stock. If at any time
the Investment Property or any part thereof consists of margin stock, the Debtor
shall promptly so notify the Secured Party and deliver to the Secured Party a
duly executed and completed Form U-1 and such other instruments and documents
reasonably requested by the Secured Party in form and substance reasonably
satisfactory to the Secured Party.
(e) Notwithstanding anything to the contrary contained herein, in the
event any Investment Property is subject to the terms of a separate security
agreement in favor of the Secured Party, the terms of such separate security
agreement shall govern and control unless otherwise agreed to in writing by the
Secured Party.
Section 7. Power of Attorney. In addition to any other powers of
attorney contained herein, the Debtor hereby appoints the Secured Party as the
Debtor's attorney-in-fact, with full power to sign the Debtor's name on
verifications of accounts and other Collateral; to send requests for
verification of Collateral to the Debtor's customers, account debtors and other
obligors; to endorse the Debtor's name on any checks, notes, acceptances, money
orders, drafts and any other forms of payment or security that may come into the
Secured Party's possession or on any assignments, stock powers, or other
instruments of transfer relating to the Collateral or any part thereof; to sign
the Debtor's name on any invoice or bill of lading relating to any Collateral,
on claims to enforce collection of any Collateral, on notices to and drafts
against customers and account debtors and other obligors, on schedules and
assignments of Collateral, on notices of assignment and on public records; to
notify the post office authorities to change the address for delivery of the
Debtor's mail to an address designated by the Secured Party; to receive, open
and dispose of all mail addressed to the Debtor; and to do all things necessary
to carry out this Agreement. The Debtor hereby ratifies and approves all acts of
any such attorney and agrees that neither the Secured Party nor any such
attorney will be liable for any acts or omissions nor for any error of judgment
or mistake of fact or law other than such person's gross negligence or willful
misconduct. The Secured Party may file one or more financing statements
disclosing its security interest in any or all of the Collateral without the
Debtor's signature appearing thereon. The Debtor also hereby grants the Secured
Party a power of attorney to execute any such financing statements, or
amendments and supplements to financing statements, on behalf of the Debtor
without notice thereof to the Debtor. The foregoing powers of attorney, being
coupled with an interest, are irrevocable until the Obligations have been fully
paid and satisfied and all agreements of the Secured Party to extend credit to
or for the account of the Debtor have expired or otherwise have been terminated.
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8. Defaults and Remedies.
(a) The occurrence of any one or more of the following events shall
constitute an "Event of Default" hereunder:
(i) default in the payment when due (whether by demand, lapse of
time, acceleration or otherwise) of the Obligations or any part
thereof; or
(ii) default in the observance or performance of any covenant
set forth in Sections 4(b), 4(c) or 6(b) hereof or of any provision
hereof requiring the maintenance of insurance on the Collateral or
dealing with the use or remittance of proceeds of Collateral; or
(iii) default in the observance or performance of any other
provision hereof which is not remedied within 30 days after written
notice thereof is given to the Debtor by the Secured Party; or
(iv) any representation or warranty made by the Debtor herein,
or in any statement or certificate furnished by it pursuant hereto, or
in connection with any loan or extension of credit made to or on behalf
of or at the request of the Debtor by the Secured Party, shall be false
in any material respect as of the date of the issuance or making
thereof; or
(v) default in the observance or performance of any terms or
provisions of any mortgage, security agreement or any other instrument
or document securing any Obligations or setting forth terms and
conditions applicable thereto or otherwise relating thereto, in each
case after giving effect to any applicable notice or cure periods
provided for therein, or this Security Agreement or any such other
mortgage, security agreement, instrument or document shall for any
reason not be or shall cease to be in full force and effect or any of
the foregoing is declared to be null and void; or
(vi) default shall occur under any evidence of indebtedness in
a principal amount in excess of $50,000 issued, assumed or guaranteed
by the Debtor or under any indenture, agreement or other instrument
under which the same may be issued, and such default shall continue for
a period of time sufficient to permit the acceleration of the maturity
of any such indebtedness (whether or not such maturity is in fact
accelerated), or any such indebtedness shall not be paid when due
(whether by lapse of time, acceleration or otherwise); or
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(vii) the Debtor makes any payment on account of the principal
of or interest on any indebtedness which is prohibited under the terms
of any instrument subordinating such indebtedness to any indebtedness
owed to the Secured Party; or
(viii) any judgment or judgments, writ or writs, or warrant or
warrants of attachment, or any similar process or processes in an
aggregate amount in excess of $250,000 shall be entered or filed
against the Debtor or against any of its property or assets and which
remains unvacated, unbonded, unstayed or unsatisfied for a period of 45
days; or
(ix) the Debtor shall (a) have entered involuntarily against
it an order for relief under the United States Bankruptcy Code, as
amended, (b) not pay, or admit in writing its inability to pay, its
debts generally as they become due, (c) make an assignment for the
benefit of creditors, (d) apply for, seek, consent to, or acquiesce in,
the appointment of a receiver, custodian, trustee, examiner, liquidator
or similar official for it or any substantial part of its property, (e)
institute any proceeding seeking to have entered against it an order
for relief under the United States Bankruptcy Code, as amended, to
adjudicate it insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed
against it, (f) take any action in furtherance of any matter described
in parts (a) through (e) above, or (g) fail to contest in good faith
any appointment or proceeding described in Section 8(a)(x) hereof; or
(x) a custodian, receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Debtor or any substantial
part of any of its property, or a proceeding described in Section
8(a)(ix)(e) shall be instituted against the Debtor, and such
appointment continues undischarged or such proceeding continues
undismissed or unstayed for a period of 60 days; or
(xi) any guarantor of any Obligations shall die or shall
terminate, breach, repudiate or disavow its guarantee or any part
thereof, or any event specified in Sections 8(a)(vi), 8(a)(viii),
8(a)(ix) or 8(a)(x) hereof shall occur with regard to said guarantor.
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(b) Upon the occurrence and during the continuation of any Event of
Default, the Secured Party shall have, in addition to all other rights provided
herein or by law, the rights and remedies of a secured party under the UCC
(regardless of whether the UCC is the law of the jurisdiction where the rights
or remedies are asserted and regardless of whether the UCC applies to the
affected Collateral), and further the Secured Party may, without demand and
without advertisement, notice, hearing or process of law, all of which the
Debtor hereby waives, at any time or times, sell and deliver all or any part of
the Collateral (and any other property of the Debtor attached thereto or found
therein) held by or for it at public or private sale, for cash, upon credit or
otherwise, at such prices and upon such terms as the Secured Party deems
advisable, in its sole discretion. In addition to all other sums due the Secured
Party hereunder, the Debtor shall pay the Secured Party all reasonable costs and
expenses incurred by the Secured Party, including attorneys' fees and court
costs, in obtaining, liquidating or enforcing payment of Collateral or the
Obligations or in the prosecution or defense of any action or proceeding by or
against the Secured Party or the Debtor concerning any matter arising out of or
connected with this Security Agreement or the Collateral or the Obligations,
including, without limitation, any of the foregoing arising in, arising under or
related to a case under the United States Bankruptcy Code (or any successor
statute). Any requirement of reasonable notice shall be met if such notice is
personally served on or mailed, postage prepaid, to the Debtor in accordance
with Section 11(b) hereof at least 10 days before the time of sale or other
event giving rise to the requirement of such notice; provided however, no
notification need be given to the Debtor if the Debtor has signed, after an
Event of Default has occurred, a statement renouncing any right to notification
of sale or other intended disposition. The Secured Party shall not be obligated
to make any sale or other disposition of the Collateral regardless of notice
having been given. The Secured Party may be the purchaser at any such sale. The
Debtor hereby waives all of its rights of redemption from any such sale. The
Secured Party may postpone or cause the postponement of the sale of all or any
portion of the Collateral by announcement at the time and place of such sale,
and such sale may, without further notice, be made at the time and place to
which the sale was postponed or the Secured Party may further postpone such sale
by announcement made at such time and place.
(c) Without in any way limiting the foregoing, upon the occurrence
and during the continuation of any Event of Default, the Secured Party shall
have the right, in addition to all other rights provided herein or by law, to
take physical possession of any and all of the Collateral and anything found
therein, the right for that purpose to enter without legal process any premises
where the Collateral may be found (provided such entry be done lawfully), and
the right to maintain such possession on the Debtor's premises (the Debtor
hereby agreeing to lease such premises without cost or expense to the Secured
Party or its designee if the Secured Party so requests) or to remove the
Collateral or any part thereof to such other places as the Secured Party may
desire. Upon the occurrence and during the continuation of any Event of Default,
the Secured Party shall have the right
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to exercise any and all rights with respect to deposit accounts of the Debtor
maintained with the Secured Party, including, without limitation, the right to
collect, withdraw and receive all amounts due or to become due or payable under
each such deposit account. Upon the occurrence and during the continuation of
any Event of Default, the Debtor shall, upon the Secured Party's demand,
assemble the Collateral and make it available to the Secured Party at a place
designated by the Secured Party. If the Secured Party exercises its right to
take possession of the Collateral, the Debtor shall also at its expense perform
any and all other steps requested by the Secured Party to preserve and protect
the security interest hereby granted in the Collateral, such as placing and
maintaining signs indicating the security interest of the Secured Party,
appointing overseers for the Collateral and maintaining Collateral records.
(d) Without in any way limiting the foregoing, upon the occurrence
and during the continuation of any Event of Default, all rights of the Debtor to
exercise the voting and/or consensual powers which it is entitled to exercise
pursuant to Section 6(a)(i) hereof and/or to receive and retain the
distributions which it is entitled to receive and retain pursuant to Section
6(a)(ii) hereof, shall, at the option of the Secured Party, cease and thereupon
become vested in the Secured Party, which, in addition to all other rights
provided herein or by law, shall then be entitled solely and exclusively to
exercise all voting and other consensual powers pertaining to the Investment
Property and/or to receive and retain the distributions which the Debtor would
otherwise have been authorized to retain pursuant to Section 6(a)(ii) hereof and
shall then be entitled solely and exclusively to exercise any and all rights of
conversion, exchange or subscription or any other rights, privileges or options
pertaining to any Investment Property as if the Secured Party were the absolute
owner thereof. Without limiting the foregoing, the Secured Party shall have the
right to exchange, at its discretion, any and all of the Investment Property
upon the merger, consolidation, reorganization, recapitalization or other
readjustment of the respective issuer thereof or upon the exercise by or on
behalf of any such issuer or the Secured Party of any right, privilege or option
pertaining to any Investment Property and, in connection therewith, to deposit
and deliver any and all of the Investment Property with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as the Secured Party may determine. In the event the Secured
Party in good faith believes any of the Collateral constitutes restricted
securities within the meaning of any applicable securities laws, any disposition
thereof in compliance with such laws shall not render the disposition
commercially unreasonable.
(e) Without in any way limiting the foregoing, the Debtor hereby
grants to the Secured Party a royalty-free irrevocable license and right to use
all of the Debtor's patents, patent applications, patent licenses, trademarks,
trademark registrations, trademark licenses, trade names, trade styles,
copyrights, copyright applications, copyright licenses, and similar intangibles
in connection with any foreclosure or other realization by the Secured Party on
all or any part of the Collateral. The license and right granted the Secured
Party hereby shall be without any royalty or fee or charge whatsoever.
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(f) The powers conferred upon the Secured Party hereunder are solely
to protect its interest in the Collateral and shall not impose on it any duty to
exercise such powers. The Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of Investment Property in its
possession if such Collateral is accorded treatment substantially equivalent to
that which the Secured Party accords its own property, consisting of similar
type assets, it being understood, however, that the Secured Party shall have no
responsibility for ascertaining or taking any action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
such Collateral, whether or not the Secured Party has or is deemed to have
knowledge of such matters. This Security Agreement constitutes an assignment of
rights only and not an assignment of any duties or obligations of the Debtor in
any way related to the Collateral, and the Secured Party shall have no duty or
obligation to discharge any such duty or obligation. The Secured Party shall
have no responsibility for taking any necessary steps to preserve rights against
any parties with respect to any Collateral or initiating any action to protect
the Collateral against the possibility of a decline in market value. Neither the
Secured Party nor any party acting as attorney for the Secured Party shall be
liable for any acts or omissions or for any error of judgment or mistake of fact
or law other than their gross negligence or willful misconduct.
(g) Failure by the Secured Party to exercise any right, remedy or
option under this Security Agreement or any other agreement between the Debtor
and the Secured Party or provided by law, or delay by the Secured Party in
exercising the same, shall not operate as a waiver; and no waiver by the Secured
Party shall be effective unless it is in writing and then only to the extent
specifically stated. The rights and remedies of the Secured Party under this
Security Agreement shall be cumulative and not exclusive of any other right or
remedy which the Secured Party may have. For purposes of this Security
Agreement, an Event of Default shall be construed as continuing after its
occurrence until the same is waived in writing by the Secured Party.
9. Application of Proceeds. The proceeds and avails of the
Collateral at any time received by the Secured Party after the occurrence and
during the continuation of any Event of Default shall, when received by the
Secured Party in cash or its equivalent, be applied by the Secured Party as
follows:
(i) First, to the payment and satisfaction of all sums paid
and costs and expenses incurred by the Secured Party hereunder or
otherwise in connection herewith, including such monies paid or
incurred in connection with protecting, preserving or realizing upon
the Collateral or enforcing any of the terms hereof, including
reasonable attorneys' fees and court costs, together with any interest
thereon (but without preference or priority of principal over interest
or of interest over principal), to the extent the Secured Party is not
reimbursed therefor by the Debtor; and
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(ii) Second, to the payment and satisfaction of the remaining
Obligations, whether or not then due (in whatever order the Secured
Party elects), both for interest and principal.
The Debtor shall remain liable to the Secured Party for any deficiency. Any
surplus remaining after the full payment and satisfaction of the foregoing shall
be returned to the Debtor or to whomsoever the Secured Party reasonably
determines is lawfully entitled thereto.
10. Continuing Agreement. This Security Agreement shall be a
continuing agreement in every respect and shall remain in full force and effect
until all of the Obligations, both for principal and interest, have been fully
paid and satisfied and all agreements of the Secured Party to extend credit to
or for the account of the Debtor have expired or otherwise have been terminated.
Upon such termination of this Security Agreement, the Secured Party shall, upon
the request and at the expense of the Debtor, forthwith release its security
interest hereunder.
11. Miscellaneous.
(a) This Security Agreement cannot be changed or terminated orally.
All of the rights, privileges, remedies and options given to the Secured Party
hereunder shall inure to the benefit of its successors and assigns, and all the
terms, conditions, covenants, agreements, representations and warranties of and
in this Security Agreement shall bind the Debtor and its legal representatives,
successors and assigns, provided that the Debtor may not assign its rights or
delegate its duties hereunder without the Secured Party's prior written consent.
(b) Except as otherwise specified herein, all notices hereunder shall
be in writing (including, without limitation, notice by telecopy) and shall be
given to the relevant party at its address or telecopier number set forth below
(or, if no such address is set forth below, at the address of the Debtor as
shown on the records of the Secured Party), or such other address or telecopier
number as such party may hereafter specify by notice to the other given by
United States certified or registered mail, by telecopy or by other
telecommunication device capable of creating a written record of such notice and
its receipt. Notices hereunder shall be addressed:
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to the Debtor at: to the Secured Party at:
J.L. Manta, Inc. Harris Trust and Savings Bank
5233 Hohman Avenue 111 West Monroe Street
Hammond, Indiana 46320 P.O. Box 755
Attention: Michael Chakos Chicago, Illinois 60690
Telephone: (219) 933-1100 Attention: David W. Howell
Telecopy: (219) 933-1075 Telephone: (312) 461-7223
Telecopy: (312) 765-8105
Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section and a confirmation of such telecopy has been received
by the sender, (ii) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the addresses specified in this Section.
(c) In the event and to the extent that any provision hereof shall be
deemed to be invalid or unenforceable by reason of the operation of any law or
by reason of the interpretation placed thereon by any court, this Security
Agreement shall to such extent be construed as not containing such provision,
but only as to such locations where such law or interpretation is operative, and
the invalidity or unenforceability of such provision shall not affect the
validity of any remaining provisions hereof, and any and all other provisions
hereof which are otherwise lawful and valid shall remain in full force and
effect.
(d) This Security Agreement shall be deemed to have been made in the
State of Illinois and shall be governed by, and construed in accordance with,
the laws of the State of Illinois. The headings in this Security Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning of any provision hereof.
(e) This Security Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterpart signature
pages, each constituting an original, but all together one and the same
instrument. The Debtor acknowledges that this Security Agreement is and shall be
effective upon its execution and delivery by the Debtor to the Secured Party,
and it shall not be necessary for the Secured Party to execute this Security
Agreement or any other acceptance hereof or otherwise to signify or express its
acceptance hereof.
(f) The Debtor hereby submits to the non-exclusive jurisdiction of
the United States District Court for the Northern District of Illinois and of
any Illinois state court sitting in the City of Chicago for purposes of all
legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. The Debtor irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient form. THE DEBTOR AND THE SECURED PARTY EACH HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, the Debtor has caused this Security Agreement to be
duly executed and delivered in Chicago, Illinois, as of this _______ day of
November, 1997.
J.L. MANTA, INC.
By
ATTEST: _____________________,_______________________________________
(Print or Type Name) (Title)
__________________,__________________________________Secretary
(Print or Type Name) (Title)
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Exhibit 99.1
[EIF HOLDING INC. LETTERHEAD]
PRESS RELEASE
For Immediate Release
EIF HOLDINGS COMPLETES ACQUISITION OF J L
MANTA, RECHING $60 MILLION IN ANNUALIZED REVENUE
ANAHEIM, California- Thursday November 20, 1997, EIF Holdings [OTCBB:EIFH]
announced that the Company has completed the acquisition of JL Manta, Inc. The
acquisition boosts EIF's annualized revenue in the specialized maintenance
industry to approximately $60 million. Financing for the $8.5 million
transaction consisted of $6 million in subordinated debentures provided by Deere
Park Capital and $2.5 million in seller notes. The subordinated debentures are
convertible into the shares of the Company's preferred stock at a share price of
$1.00 per share, once preferred shares have been approved by shareholder vote.
Ultimately, the preferred shares will be convertible into common stock on a
share for share basis.
Commenting on the acquisition, Frank Fradella, President and CEO of EIF
Holdings, stated, "The acquisition of JL Manta solidifies our presence in the
specialized maintenance industry, an industry characterized by a predominance of
cost-plus contracts and significant repeat business. We believe this provides
our investors with relative stability of revenues and earnings. JL Manta has a
strong customer base, substantial backlog and 80 year history of successful
performance. The acquisition is the next step in a transition process started
earlier this year when we discontinued our fixed price commercial asbestos
abatement operations and made substantial reductions in our overhead structure.
Looking ahead, we intend to build shareholder value through additional
acquisitions in this industry and managing the internal growh of our existing
businesses.
EIF Holdings provides specialized maintenance services for clients in the
industrial, low-level nuclear and environmental sectors. The company offers a
full range of services to its clients located throughout the United States.
For further information, call:
Andrew White
(281) 537-9660
[EIF HOLDINGS, INC.. LETTERFOOT]
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